Money Management’s 2014 Top 100 Dealer Group research has revealed an industry which has changed substantially since 2007/08 and might be on the cusp of further change.
Vertical integration and the consequent dominance of the big banks has been a focal point for the financial planning industry over the past seven years but the 2014 Money Management Top 100 data published in this edition suggests the trend towards vertical integration has peaked.
A close examination of the data reveals that while the major banks have, indeed, come to further dominate the financial planning space over the past half-decade, they are no longer dominating growth in terms of absolute planner numbers. Rather, most growth over the past 12 months has been generated by medium-sized players, both aligned and non-aligned. Very often, this growth has been the product of merger activity.
Even AMP Limited, while having grown its planner numbers over the past 12 months, has done so at a more subdued rate than in previous years.
These outcomes should probably be viewed as inevitable in circumstances where the strategies put in place by the likes of the Commonwealth Bank, NAB and Westpac had largely run their course, while medium-sized and emergent entities such as Australian Unity and Yellow Brick Road were seen to be growing out their adviser footprints.
However when the 2014 Top 100 data is weighed against the pre-Global Financial Crisis data of 2007/08, it becomes evident just how significantly the structure of the financial planning industry has changed with the banks growing not only their planner numbers but diversifying their relationships with planning firms via dealer group services models.
At the same time, a comparison between 2007/08 and 2013/14 reveals the disappearance or departure of a number of mid-size dealer groups such as Australian Financial Services and radical changes in management and direction such as with Professional Investment Services.
What also needs to be understood about this year’s Top 100 data is that it reflects the reality of a tumultuous 12 months which included the passage of the former Labor Government’s Future of Financial Advice (FOFA) legislation, a change of Government at the September Federal Election and the consequent debate around the new Government’s FOFA amendments.
Flowing from this scenario was the uncertainty around grandfathering - something which served to substantially subdue planner migration between dealer groups and therefore added a new dimension to this year’s Top 100 data.
That said, few readers will fail to recognise the impact of the merger and acquisition activity which has taken place in the industry, not least the acquisition of Centric Wealth by Findex and Peter Daly’s return to the sector via Beacon Financial Group , the Financial Link Group and the Titanium Group.
Nor will readers be oblivious to the reality that much of the merger and acquisitions activity taking place in the financial planning industry is being driven by accounting groups as they look to both diversify and grow their revenue streams.
What should also be noted, however, is that despite vertical integration and current merger and acquisition activity, the actual number of financial advisers operating in the sector has not substantially altered over the past 12 months, suggesting that the industry is not significantly expanding in absolute numbers.
With vertical integration appearing to have run its course, will next year’s Money Management Top 100 research reveal the re-emergence of the push towards boutiques? Probably not, but the current cycle is definitely coming to an end.