The financial planning industry in Australia will follow in the UK’s footsteps and see similar trends and turnaround to what happened in the United Kingdom a few years ago, according to WT Financial Group.
WT Financial Group’s managing director, Keith Cullen, said during a webinar on Monday that after a review of the industry, the UK’s financial planning industry initially experienced a “somewhat of a downturn in value in the industry and internal value”, but then it quickly turned around and saw a significant growth.
“The Royal Commission had a big structural impact on the industry, and you might have read about a lot of advisers leaving the industry, about banks getting out of the space altogether, that have been spooked by the Royal Commission. Well, look, we saw a similar thing to this in the UK,” he said.
“And we also saw certain players just leaving the industry altogether, and therefore initially there was somewhat of a downturn in value in the industry and internal revenue, but this quickly turned around in the UK and they've since seen significant growth, it's been averaging around 9.5% per annum.
“So, it's that turnaround and growth of the industry as a consolidates and resets and modernises that we're going to be taking advantage of because we will see exactly the same trends here in Australia.”
However, according to Cullen, while the demand for advice would continue to grow in Australia, with the expected largest intergenerational wealth transferrin history over the next 15 to 20 years, advisers would need the support of strong dealer groups with the right infrastructure in place to help them deal with the upskilling required to deal with the increased demand and complexity.
At the same time, the smaller low-cost dealer groups would be further marginalised as they would not be able to offer the required support to their advisers and this would present further opportunity for both organic growth of advisers leaving those groups, as well as potentially transactional growth.
Cullen said that the Royal Commission had a considerable impact on the industry and forced many businesses to rethink their models and how they would monetise their assets and unlock and recover shareholders value.
In case of his business, at that time, the board and the shareholders determined it would be best to shift thinking and become primarily a business-to-business (B2B) operator.
“Our primary driver for adopting this strategy was that in the wake of the Royal Commission. We saw what became a rapid unravelling of the traditional vertically integrated model, where the banks had bought out all the dealer groups to aid the distribution of products,” he said.
“We felt that [becoming a B2B business] would enable us to leverage those assets and the intellectual property that we developed through our journey of building a B2C [business-to-consumer] operation.”