Money Management’sTop 100 survey 2002 revealed that 42 per cent of Australia’s top dealer groups are privately owned. It’s a figure that has remained relatively constant over the years. Of the 42 groups that hold a position in the Top 100, 16 make it into the Top 50 Distributors list — a figure that is also comparable to previous years.
But while they represent almost a third of the Top 50 distributors, boutique dealer groups together account for only 25 per cent of all advisers in Australia, service around 729,000 of the country’s three million plus clients and have combined funds under advice of about $23 billion.
Figures for numbers of clients and funds under advice are often inaccurate. Private groups are notoriously coy and many would not disclose figures toMoney Managementfor either category.
Private ownership today means much the same as it did in previous years — groups are either fully owned by advisers (and sometimes their staff), fully owned by director/s (and sometimes their staff) or fully owned by a combination of all three. Four groups in the Top 50 are listed companies includingCount(which is 24 per cent owned by the Lambert family),Deakin Financial Services, Investor Financial Planning and the now all-but-defunctStockford Financial Services.
Some private groups do have some institutional support —Associated Planners, for example, is 30 per cent owned by Zurich,Professional Investment Services(PIS) is nine per cent owned byNorwichandTowerbought a 16 per cent stake in theMawson Grouplate last year. But for the most part, private groups are proudly independent and keen to stay that way.
Lifespan Financial Planningis a collection of independently owned and operated financial planning practices. And managing director John Ardino thinks the benefits of independent ownership far outweigh the disadvantages.
“Real professionals really don’t want to operate in an environment where there is tacit or explicit pressure to achieve sales and production quotas,” he says.
“Freedom from a whole variety of inevitable and inexorable institutional pressures is one of the great rewards of independence.”
Ardino argues that truly professional financial planning advice is best given by planners who are not aligned to institutions.
“Ultimately, the big end of town cares more about their profits, efficiencies and economies of scale than satisfying the needs and goals of investors. I would not like my doctors to be employed by pharmaceutical companies, or my architects and engineers to be employed by construction supply companies,” he says.
He also argues that independently-owned practices can also decide what service levels they will offer their clients under their own self-determined pricing structures, irrespective of whether the parent company finds this profitable.
“Independents can, within reasonable bounds, decide on what level of business they want to build, rather than again satisfying the dictates of the principal parent company, which may decide that only very large production levels are viable,” he says.
“I also believe that client satisfaction is more likely to be higher if [a planner] is free of these pressures and so their work satisfaction is enhanced.”
But running a small boutique practice is not without its share of problems. And they are the same problems associated with running any small business.
This, says Ardino, includes lack of large scale financial and human resources, higher professional indemnity, technology and infrastructure costs, and lack of economies of scale. And of course, the competition posed by the large institutions.
“Large institutions can offer cut price or free plans or reviews,” Ardino says.
