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
With the final tally for FY25 now confirmed, how many advisers left during the financial year and how does it compare to the previous year?
HUB24 has appointed Matt Willis from Vanguard as an executive general manager of platform growth to strengthen the platform’s relationships with industry stakeholders.
Investment manager Drummond Capital Partners has announced a raft of adviser-focused updates, including a practice growth division, relaunched manager research capabilities, and a passive model portfolio suite.
When it comes to M&A activity, the share of financial buyers such as private equity firms in Australia fell from 67 per cent to 12 per cent in the last financial year.
