This edition ofMoney Managementwill likely be the most anticipated and widely read this year due to the information which appears on pages 30 and 31 — the Top 100 Dealer Groups tables. Despite it being a page full of numbers, there are a few that stand out.
The first of these, at the bottom of the fourth column, is 14,338, the combined total of all those advisers in dealer groups who made the Top 100 for 2003 and it stands as a reminder that financial planning is not a cottage industry anymore, at least in terms of its size, character and diversity.
That number actually says a lot about the industry because despite a rise of 2,960 planners in the Top 100 since 1999, the actual growth since last year is only 284 or about 2 per cent.
It is important to remember that the Top 100 is a comprehensive snapshot of the industry as it stands, especially when the best anecdotal evidence suggests the total number of advisers is somewhere between 15,000 and 18,000.
No-one has yet to actually count the number of advisers but theAustralian Securities and Investments Commission(ASIC) will come close when it issues new licences under the Financial Services Reform (FSR) regime.
Yet regardless of what number you choose to believe, the Top 100 has reflected a slowdown in the rapid growth of the financial planning and advice professions.
It has been something that has been going on for some time now (table 2) and no doubt the usual suspects of FSR, poor markets, and so on are the cause but the numbers confirm that the rapid growth which punctuated the late 90s is well and truly over.
But it is also worth considering this growth may have slowed considerably not because the market is too tough or too difficult to get into, or for that matter is forcing advisers out, but rather that the industry has matured.
The last two years have been full of talk about increasing levels of professionalism, education, training and service, and it is highly likely only those advisers who fit that model have continued to remain in the industry while those who have not have begun to make their way out.
Having the benefit of five years worth of data from successive Top 100 surveys also shows that some of the shifts in numbers can be attributed to these changes with dealers no longer counting part time staff, accountants or non-practising advisers.
Despite the low numbers for the increase of the industry over the last 12 months there has been a steady growth across the five years with an average of 740 planners entering the Top 100 Dealers each year, equating to an annual average growth rate of 5.7 per cent.
And this leads to the second important batch of numbers — the number of planners held by the top 10 dealer groups, the number of planners held by fund managers and banks, and those planners who work for privately held or listed groups.
These numbers are important on a year by year basis but also over the five year span because they reveal the trends that are shaping the face of the industry and how advice is being delivered.
And a trend which seems to have slowed dramatically is the rising presence of the big end of town.
In 1999, banks held 22 per cent of planners, which then climbed to its highest number last year at 35 per cent, or 4,800 planners. This year they hold 4,346 planners, or 30.3 per cent of the Top 100. At the same time, the number of groups held by the banks also dropped from 25 to 16, marking the first time the banks have suffered a loss as a group in the Top 100.
Fund manager owned dealers also came off a high in 2002, dropping from 29 groups with 4,760 planners or 35 per cent of the Top 100, to 23 groups, but only marginally less advisers at 4,699 or 32.8 per cent.
The winners from these falls are those dealer groups that are privately held, listed or held by directors, advisers or a combination of the two which have lifted their numbers in the Top 100 from 42 dealers to 54, with a shift upwards from 4,300 planners to 4,735. This rise of 435 claws back some ground lost in recent years and moves them from 30.5 per cent to 35.8 per cent of the Top 100 over the last 12 months.
The shift in the bank groups can be attributed to some rationalisation by the Commonwealth and National Australia groups.
Commonwealth now runs two planning groups —Commonwealth Financial Planningwith 660 planners andFinancial Wisdomwith 414 planners. While the table shows the latter had 415 planners in 2002, that number is retrospective and reflects the combined total for last year withCommonwealth Financial Solutions, which was in fact rolled into Financial Wisdom earlier this year. Separately, Financial Wisdom had 248 planners and Commonwealth Financial Solutions had 167 planners in last year’s table.
But the rolling together of the two brands is not new. In 1999 the Commonwealth andColonial fielded six names in the Top 100 but since the acquisition of the latter by the former in 2000, this number has dropped back to two names this year.
The moves by the National Australia group are not as big with AdvantEdge moving intoMLC Private Client Servicesand National Private Client Services moving intoNational Australia Financial Planning. The group’s other brands —Apogee,Garvan,Godfrey PembrokeandMLC Financial Planning— have had mixed fortunes but still remain as active brands in the market.
Westpac Bank has suffered a loss of 120 planners in the last 12 months and this is partly due to a restructure of the advice division in the bank as it integratedBT Funds Management.
Despite these changes over the past 12 months, the institutionally owned dealers continued to dominate the top 10 dealer groups, with five posting a top 10 ranking each year since 1999 and two hitting the top 10 four times over the same period (table 1).
In fact, the top 10 dealers have moved from 5,423 planners in 1999 to 7,479 this year, maintaining their influence, which can be seen in the slight move from 47.66 per cent to 52.16 per cent of all Top 100 dealers over the five years.
The average number of planners in the top 10 dealers is also well ahead of the Top 100 average, with top 10 dealers moving from an average of 542 dealers to 748 from 1999 to 2003 while the overall average only moved from 114 to 143 in the same time.
Each year sinceMoney Managementpioneered the research in 1999, the Top 100 Dealer Groups has ranked groups on the number of advisers working with the dealer group at the time the data was collected, which in this case was early August.
Over the five years there have been requests for the data to be ranked on funds under advice per dealer, funds under advice per planner, clients per planner and so forth, as befits an industry that measures itself by what it produces, not just on who is in it.
Smaller tables have been created detailing these numbers for those planning groups which have supplied them (p22) but given the usual reluctance of many dealer groups to supply information beyond the basics, it still remains difficult to do that for the Top 100 each year, hence the overall table remains ranked by the most common denominator — financial advisers. Whether the benchmark will shift to other criteria is hard to tell. Given the intangible nature of financial adviser numbers, it may be the best we can hope for.
Last year in a similar article inMoney Managementit was predicted this year’s Top 100 would see the smaller end of the market grow both in terms of advisers and dealers — this has occurred. It also stated the growing polarisation towards the big and boutique ends of the market would continue — this has also happened.
That same article predicted the number of dealer groups held by banks and fund managers would decrease, something which has occurred, but also missed the mark by predicting adviser numbers would also climb — which has not occurred for the first time since 1999.
However, that same article finished by stating the industry of 2003 would be a different place. It is. And as it hurtles towards 2004 and a date with FSR, expect the landscape to change again but with all the uncertainty that brings, this time we are not going to make any predictions!
