Young financial planners "only see upside" with C&D clients
Younger financial planners are snapping up C & D client lists from established practices and treating them as a referral source, according to NAB Financial Planner Banking national manager Daniel Lowinger.
The onset of the new regulatory regime is motivating older financial planners to restructure their businesses by selling off their lower value clients, Lowinger said.
While commission arrangements entered into with clients before the Future of Financial Advice commencement date look set to be grandfathered, "eventually that will fall away anyway, because clearly [planners] don't have a relationship with those clients", he said.
Most lower-value clients tend to provide practices with only $100 a year, "so it just doesn't make sense to have them onboard", Lowinger said.
Books of C & D clients are receiving attractive multiples of 3-3.2 times recurring revenue, driven by demand from planners in their early 30s who are "ready to go out and run their own business", Lowinger said.
"They realise that these clients would never have been touched before, and all of a sudden they can start to provide them service - get in contact with them, build a relationship and so on," he said.
"They only see upside. They're almost buying it as a referral source. It takes a long time to get 1,000 referrals - whereas you can buy a [C & D] client base that's ready-made," Lowinger said.
"We've seen it in practice. There are certain groups that are selling down the C & Ds. AXA did it well through the Discovery program, and [NAB-owned] MLC are doing it particularly well at the moment with the Connect for Growth program," he said.
Recommended for you
The top five licensees are demonstrating a “strong recovery” from losses in the first half of the year, and the gap is narrowing between their respective adviser numbers.
With many advisers preparing to retire or sell up, business advisory firm Business Health believes advisers need to take a proactive approach to informing their clients of succession plans.
Retirement commentators have flagged that almost a third of Australians over 50 are unprepared for the longevity of retirement and are falling behind APAC peers in their preparations and advice engagement.
As private markets continue to garner investor interest, Netwealth’s series of private market reports have revealed how much advisers and wealth managers are allocating, as well as a growing attraction to evergreen funds.
