For the first time since Money Management began publishing its Top 50 Distributors list, the big players have loosened their stronghold on Australia’s financial advice distribution channels. But not by much.
The top six on the list still hold around 53 per cent of all the advisers in the entire Top 50, even though all six have lost advisers this year.
Despite shedding 150 advisers between them, institutional giants AMP and National Australia Bank have managed to top the list for the fourth time running. Privately owned Professional Investment Services and listed Count Financial hold onto third and fifth places respectively from last year, while the Commonwealth Bank has clawed its way up to fourth at the expense of AXA, which has slipped down to sixth.
The fact that these six groups constitute such a large chunk of financial advice distribution in Australia is nothing new.
When Money Management first undertook this survey back in 2001, the top six at the time clearly dominated distribution, hoarding close to half of the advisers in the entire Top 50.
By 2003 the top six tightened their grip, holding more than 58 per cent.
But 2004 shows a halt to this growth in dominance. In a year that has seen the introduction of the Financial Services Reform Act (FSRA), that percentage has dropped from 58 per cent down to 53.5 per cent. In fact, out of the top 10 groups on this year’s list, eight of them lost at least 40 advisers each.
So who has taken up the slack?
The independent distributors have certainly boosted their adviser numbers. Dealerships run privately by directors or by planners now account for 28.7 per cent of the advisers in the Top 100 Dealer Groups.
Not surprisingly, banks and fund managers still own the majority of advisers with the two exceptions to this rule, privately owned PIS and ASX traded Count, still holding sway at the top of the table.
But this year, the banks lost out, only holding onto 26 per cent of the industry, down from 35 per cent last year. They have been overtaken by fund managers which own 35 per cent of advisers in the Top 100, up 1 per cent from last year.
Some of this could be attributed to advisers shifting groups following the bad press generated by the Australian Consumers’ Association/Australian Securities and Investments Commission quality of advice report released in February last year.
This, coupled with the introduction of FSR, has placed greater emphasis on transparency and planner ‘independence’, and it is possible that advisers might be attracted to boutique dealers to gain an image of independence by association.
Managing director of dealer group Financial Partnership (of which IOOF owns a minority stake), Stuart Abley, says some advisers feel the bigger institutions don’t deliver on their promises and charge hefty fees for the privilege.
He says there are many advisers that are unhappy within these groups because they feel they are treated as just a number.
“There is definitely a level of dissatisfaction. With the industry becoming more sophisticated, mature and transparent in terms of doing real financial planning, I don’t think they can provide the adviser with the ingredients to do that successfully, so I think the boutiques provide a better working situation for planners,” Abley says.
It is also possible that FSR has forced a lot of smaller groups to expand to achieve the scale they need to maintain a viable business in the face of increased compliance costs.
This growth in numbers for the small to mid-sized groups is evident in this year’s Top 50.
In fact, the bottom 25 distributors now account for 9.75 per cent of the Top 50, up from 8.1 per cent last year. And while the top six groups lost 637 advisers, the bottom 25 picked up 151.
Where did the other 486 go? Some have gone to the middle players, but as has been shown in the last two Top 50 tables, these distributors, with between 100 and 500 advisers, tend to be a little thin on the ground.
This could be because as soon as a group grows sufficiently to leave its boutique status behind, it either merges with another mid-sized dealership or gets gobbled up by one of the big fish. Some advisers from these bigger groups might leave to establish their own boutiques only to become fish food for another big institution.
Back in 2001, when NAB bought out Godfrey Pembroke, 11 planners broke away to set up their own dealership, Vector Financial Consultants. In a continuation of the cycle, a now fatter Vector has had a 50 per cent stake bought out by the FSP Group.
Associated Planners Financial Services is another group set to be aligned with an institution, pending a vote by its shareholders on July 30 on the proposed acquisition by Challenger Financial Services Group.
But despite all the mergers and breakaways, this year the chasm between the large scale institutionally owned distributors and the independents has narrowed a little, with middle players like Zurich, Tower, FSP, Asteron and Mawson Securities all picking up advisers. These groups, from positions seven to 24 on the table, account for 37.5 per cent of all advisers in the Top 50, as opposed to 35 per cent last year.
The table shows that an extra 302 advisers went to the mid-sized distributors. It should be noted, however, that 262 of these came from ING which didn’t actually take on any new advisers, but rather renamed former ‘corporate agents’ who this year became authorised to offer life and super advice.
With the 151 that went to the bottom 25, that still only accounts for 453 out of the 637 missing from the top six.
Perhaps then, some planners have decided to leave the profession altogether.
There’s no doubt that the sweeping changes brought in by FSRA with its stricter compliance and educational requirements have frightened some advisers off.
And then of course, there are the hundreds of other smaller dealer groups who didn’t make this year’s Top 50, which may also have picked up advisers from the institutions.
Next year’s Top 50 Distributors, when the dust in the industry settles, may paint a different picture.
