Planning industry in state of flux

Despite the controversies and challenges, the absolute size of the Australian financial planning industry has remained relatively stable, according to Money Management TOP 100 Survey, Oksana Patron finds.

Despite continuing uncertainty generated by factors such as the Life Insurance Framework (LIF)and the push towards higher standards of education and professionalism, the Australian financial planning industry remained almost static in 2015/16, according to Money Management's annual Top 100 Survey.

What the survey revealed was that the total number of planners had not changed drastically since last year, showing a less than 1.5 per cent decrease from the data obtained 12 months ago.

What has changed, however, is the make-up of the industry with some of the major institutional players restructuring their operations and, in some instances, scaling back on absolute planner numbers.

In the case of Suncorp there was the decision to exit the planning sector, while National Australia Bank restructured elements of its planner footprint, as did ANZ, while the Commonwealth Bank continued to make adjustments and changed some key personnel.

This stood in contrast to a number of the larger non-aligned groups such as Synchron and Dover which managed to significantly increase adviser numbers.

Of the aligned groups, in particular those that had been traditionally ranked as the largest groups in the TOP 100 ranking, AMP Financial Planning shed the highest number of planner positions, in absolute terms, with a departure of 74.

Similarly, Securitor posted the lower overall number of planners and saw 66 planner departures counting-year-on year.

Westpac, which last year showed steady growth by adding 41 advisers after adding 390 planners in 2014, this year actually posted a decline with 47 advisers.

Outside of the top ten companies, the highest decrease in a number of planners was registered by ANZ Financial Planning which reduced the number of planner by 55.

Commonwealth Financial Planning, which last year registered the highest decrease in the total number of planners, of 59, this year continued to reduce its headcount with another 42 advisers leaving the company.

At the same time, ClearView Financial Advice, almost two years' after its merger with Matrix Planning, posted stable figures for both companies, with only planner numbers increasing by less than 10 across both companies.

Some of the highest growth in planner numbers was registered by non-aligned groups. Synchron again managed to grow its team by the highest number of planners, adding 66 people compared to 44 new planners who came to a company last year.

However, the highest single increase was achieved by Dover Financial Advisers which saw an arrival of 91 new planners this year.

Across the board, of all the companies that participated in Money Management TOP 100 survey, 65 per cent of dealer groups reported an increased number of planners.

The Top 10

The TOP of planning groups saw only a few changes this year with the arrival of a combined Garvan Financial Planning and MLC Financial Planning as well as a non-aligned group Synchron, while Financial Wisdom, designated by its parent Commonwealth Bank (CBA) as its major advice specialist, moved to the ninth place from tenth a year ago.

At the same time, other groups were continuing to implement changes and realign their business models. Australian Unity, which grew its total number of planners by 47 year-on-year, following its acquisition of Premium Wealth Management in 2014, explained that the advisers from Premium transitioned to Australian Unity only over the last financial year.

Mergers and Acquisitions

In May, First State Super announced that it had reached a binding settlement agreement to buy StatePlus financial planning business, that provides advice and investment services to current and former public sector employees, after SAS Trustee Corporation (State Super) had undertaken a sale process for the firm.

The superannuation fund said at the time that it was expecting the acquisition would help it create one of the country's leading financial advice businesses with over $21 billion in retirement funds and over 200 financial planners located in both metropolitan and regional centres across Australia and operating out of 25 offices around the country.

Also, the acquisition was expected to bring total funds under management to over $70 billion. In June First State Super officially became the new owner of StatePlus after it's former parent company had conducted a dual-track sale process which included trade sale options and a potential listing on ASX.

According to Money Management TOP 100 survey, the move helped StatePlus increase its number of planners by 18 while First State Super also managed to slightly grow its team, with an addition of the six new advisers.

Another independent financial planning licensee Fortnum Financial Group announced in August, 2015, its merger with a platform provider netwealth Investments' subsidiary, Financial Planning Services Australia (FPSA), which resulted in an increase of 13 new planners.

Additionally, under the terms of a deal, netwealth was to continue providing a range of services, including platform, managed account, financial planning software and compliance services to the newly-created Fortnum and FPSA group. The proposed entity was expected to be jointly owned by both Fortnum and FPSA's 20 member firms of 54 principal practices and 130 advisers.

Finally, only a few weeks ago, two other financial planning businesses announced their merger plans, with Dixon Advisory, a specialist retirement planning services, and Evans and Partners, who according to ASIC's Financial Advisers Register hired around 40 advisers in September, deciding to merge. The two companies already entered into heads of agreement to form a new entity, Evans Dixon. It is understood that under a new deal, all existing businesses, Evans & Partners, Dixon Advisory and Walsh & Company would all retain their identities under the merged group. The purpose is to create an Australia-based but globally facing advisory services. It is expected that newly-formed group would operate out of its offices in Melbourne, Sydney, Canberra, Brisbane and New York with over 600 staff dealing with 8,000 clients representing in excess of $20 billion in capital, and with a proposed completion of due diligence and formal completion of the merger to occur at the end of November.

According to ASIC, there were around 74 planners associated with Dixon Advisory.

2016 also saw the arrival of new financial advisory businesses Bentleys Wealth Advisors which was launched in August by Bentleys NSW, a mid-tier accounting, taxation and audit firm. The new division will focus on delivering personal financial advice including superannuation and retirement planning advice, insurances, investment strategies and self-managed super funds to local and national clients.

Industry issues

Recent months also proved that the industry remained divided over its future, with an ongoing discussion among planners about the benefits offered by both institutional and non-aligned groups. Planners questioned the value they received under existing arrangements with dealer groups, prompting them to look for alternatives and consider a self-licensing model.

However, opponents warned of consequences, which might be especially severe for those less experienced. Sceptics also questioned the planners' ability to deal with the compliance issues and thorough understanding of the obligations as an Australian financial services licensee (AFSL).

Pressure continued to separate advice from products, with the main criticism pointed in this case at bank-aligned dealer groups with many critics indicating a necessary break between advice and product in order to overturn the negative culture.

New regulations and growing costs forced the accounting sector to consider the benefit of moving into financial planning.

While higher entry requirements and improved educational standards for the prospective planners were aimed at bringing back confidence and winning back customers' trust.

However, sceptics said this would not entirely eliminate the unethical behaviour plaguing the financial planning community. They said degree-qualified professionals would not necessarily help further professionalise the sector.

With a lot speculation going on in the market over its future, there is a number of emerging trends that look at the possible scenarios. According to Rod Bristow, a managing director of Infocus Group, major institutional licensees would soon have no other option than either go direct to customers or move solely to a salaried advice model to better control their risks and margins.

"The clock is ticking on some of the larger AFSLs currently within institutional ownership. It's only a matter of time before these are either sold or closed down. Advisers in these cases will be left with no choice but to move to a salaried model within an internal AFSL of that institution, or find a new home with a quality AFSL if they want to remain non-aligned," he said.

 

Money Management 2016 Top 100 Financial Planning Group Survey