Australia’s fund managers and financial planning dealer groups are facing a tough road ahead if they are to woo the country’s best performing financial advisers, a new study has highlighted.
The research, released for the first time at this year’sFinancial Planning Association(FPA) convention, shows 94.7 per cent of top performing advisers believe financial planning dealer groups or fund managers will have to work harder to try to win their loyalty and support.
The research shows these high-end advisers, defined as those personally earning more than $250,000 a year, feel they are in a position of strength and will pick and choose which funds management or financial planning groups they align themselves with, in accordance with the level of service they are afforded.
The study, based on 630 telephone interviews with financial advisers in August, was conducted by Australian consulting firm Strategic Consulting and Training (SCAT) in association with the US-based CEG worldwide group as part of an ongoing research partnership.
Its findings hint at a slow erosion of adviser loyalty to long held relationships with any particular organisation, and the dawning of a new era where advisers will increasingly shop around to get the best deal for themselves and their business.
“The old relationship-based loyalty models between advisers and fund managers will be tested more than ever before,” SCAT managing director Jim Stackpool says.
“The top performing advisers are seeking more than just a good relationship. They are seeking assistance in all areas that help them provide better advice to their clients, better careers to their team members, better profits for their business and better returns to their shareholders.”
That is likely to mean a more intensely competitive environment among dealer groups and fund managers, as both sets of service providers increasingly vie for the loyalty of better performing advisers.
However, SCAT general manager Angela Clarke says only those organisations that fully grasp the changing nature of financial planning businesses will be in a position to attract top performing advisers.
“There are a lot of people competing — a lot of dealer groups and funds managers — for the same adviser market and I think in the adviser’s practice it is very different operating a business now than it was five years ago,” Clarke says.
“At that time, advisers really had to support themselves, build their own infrastructure and operate fairly independently. I think now they are looking to the funds manager or dealer group to provide the efficiencies on a larger scale that help them run their own practice.
“Advisers really had to move into being a business person and a business owner, as well as being a financial adviser. Without losing focus on the advisory side, they still need to run their practice efficiently and that is where they are looking for support.”
It is not only a changing business landscape that is pushing financial advisers to demand more support services from their dealers and fund managers. Government imposed regulatory requirements, such as the Financial Services Reform Act (FSRA), have also made financial planners more aware of the services they need to obtain from a dealer group or fund manager.
“The increasing [regulatory] demands are certainly taking up a lot of advisers’ time. We are even seeing a lot of advisers who are wanting to align themselves with a dealer when in the past a lot of those advisers might have looked at getting their own dealer’s licence. They are now asking who they can partner with to help them manage that huge burden,” Clarke says.
Whatever their level of service, however, dealer groups and fund managers may have their work cut out for them trying to meet advisers’ own expectations about the level of success they want to achieve with their business.
The SCAT study found an alarming majority of advisers — 89 per cent — are either dissatisfied or extremely dissatisfied with the level of success they have achieved to date.
Most advisers — just over 75 per cent — are also expecting increased competitive pressures, perhaps signalling they are looking to partner up with a dealer or funds manager who can help them stand out from the pack.
“The reason for advisers staying [with a funds manager or dealer group] in the past will be very different from the reasons for staying in the future. It is a real re-education of the market and it will need to be taken into account on both sides — the adviser side and the dealer group and funds manager side,” Clarke says.
The SCAT research also provides some significant insights into where advisers are looking to position their businesses for future success.
According to the study, 67 per cent of Australian advisers believe that holistic wealth management will emerge as a winning model for the future, while only 8.4 per cent believe that specialist financial planners will be more successful.
“The key thing is to be aware that we are not saying that you won’t have a niche market that you supply services to, but the service you supply will be one of a holistic or wealth management nature. So, you might still say that your niche is to provide financial advice to people in the medical profession, but then the services you provide are holistic services,” Clarke says.
The study, entitledThe RoadAhead: The Future of the Advisory Business, was released atthe FPA conference by JohnBowen, the chief executive ofCEG Worldwide.
