Optimism in the face of reduced planner numbers

Milana Pokrajac finds many significant players in the dealer group sector have reduced their financial planner numbers, though the industry remains optimistic.

While some dealer groups enjoyed tremendous growth regardless of the economic and regulatory environments, others have significantly reduced the number of planners operating under their licence.

According to Money Management/ DEXX&R Top 100 Dealer Groups table, Bendigo Financial Planning, Financial Services Partners, AXA, Sentry and Count Financial are some of the fastest shrinking dealer groups, with Bendigo shedding almost 40 per cent of its adviser base.

Count lost 127 advisers, while 85 left AXA over the past year to 31 March 2012 (see Table 1).

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It is, however, important to remember that AXA’s merger with AMP officially began at the beginning of last year, with many of their advisers being tempted by institutions such as MLC, which launched aggressive campaigns to try and lure them in.

Similarly, Count planners too, were targeted by BT Financial Group, which reportedly offered generous “sign-on” fees for switching over.

While both AMP and Commonwealth Bank did their best to retain as many advisers as they could, it would be no surprise that some (85 and 127 respectively failed to resist the temptation.

As for FSP and Sentry, they are both owned by ANZ’s wealth management division, which has struggled with disappointing results over the past couple of years.

At the other end of the spectrum (Tables 2 and 3) there are quite a few players who have achieved tremendous growth over the past year.

National Australia Bank (NAB) owned dealer groups flew under the radar, with all bar one growing their planner base.

Most impressive are NAB Financial Planning and Garvan Financial Planning, having added 72 and 84 authorised representatives to their licence in the past year.

AMP Financial Planning and its sister group Hillross Financial Services both achieved a 10 per cent growth, while Australian Unity Personal Financial Services surprised all and took out the Dealer Group of the Year title for 2012.

As for funds under advice FUA, AMPFP remains the largest dealer group out there, with over $42 billion under advice.

Industry feeling optimistic

Despite moody markets and delayed government decisions with respect to the Future of Financial Advice (FOFA) package and other legislative change, industry leaders have not had their spirits dampened.

“I’m not sure when those better times will come, but we’ll just get on doing what we always do and that’s try and seek out the clients and make sure that we’re providing the best possible quality advice that we can,” said Michael Guggenheimer, head of AMP Financial Planning.

Similarly, head of adviser business at Colonial First State (CFS) Marianne Perkovic is also optimistic, saying it will get easier once the industry works through FOFA.

“Once we work through the implementation of FOFA, underlying what we have is still Australians that need to get advice and I think if we can deliver it more effectively and efficiently and help educate and train our advisers better – we’ll be in a much better position,” she said.

CFS-owned Financial Wisdom reviewed its business for the last financial year and, according to chief executive officer Mark Ballantyne, there are principles of successful financial planning businesses that will make them successful, regardless of the market environment.

“I see lots of opportunities for businesses to keep those things around client engagement, client reviews and client referrals,” Ballantyne added.

But some advisers might find it difficult to continue to be positive in the next 12 months, according to MyAdviser managing director Philippa Sheehan.

“Returns on investments will be down, new codes will come in, new legislation, more product failures,” she said.

“But the light at the end of the tunnel is that many advisers are using this opportunity to reconnect with their clients, helping them to achieve their objectives without relying on returns from products.”

By doing this, the industry would see more profitable and sustainable relationships with all parties involved, she added.

Fight against new churn regime

Concerns about risk insurance policy churn raised by life insurance companies have presented a challenge for risk-focused dealer groups ever since the topic was publicly debated some years ago.

Just recently, the Financial Services Council proposed a policy to combat churn.

The new policy would see the establishment of a two-year adviser responsibility period, with 100 per cent commission clawback if the policy lapses; level commissions only being paid if ‘replacement business’ was arranged; and the removal of ‘takeover terms’ for a policy or a group of policies that are transferred by a financial adviser between insurers.

The new framework would be ready for implementation on 1 July 2013, along with FOFA.

“I will never respect a policy that attempts to address churn when all it does is try to stop policies being moved away from insurers,” said Synchron director Don Trapnell.

Trapnell has been very vocal on this issue in the past couple of years, proposing a solution of his own:

“If such a problem exists – and I don’t believe it does – the answer to churn rests in every single application for insurance,” he said.

“Every existing application for insurance says: do you have an existing life insurance policy, when was it effected, what is it, is it to be replaced?”

“If insurance companies started to track those answers and draw statistics on policies that are being like-for-like replacements within two to three years, then I’ll respect any statistics they have on churn,” Trapnell added.

Both Trapnell and Sheehan from MyAdviser expressed disappointment that life policy churn remains the subject of continuing discussion, adding insurance companies are not entirely innocent.

“Perhaps we need to see the insurance companies tighten their policies on commission clawbacks and extend the timeframe,” Sheehan said.

Trapnell also pointed to countless business development managers working for insurers who call upon advisers to consider their respective companies at renewal time.