Small dealer groups will be the fastest-growing sector of financial planning in the next five years, says industry commentator Tom Collins.
“I don’t like consolidators, as I believe planners are not just influenced by the money (they pay),” he says.
Another area of change will come with platform providers. Collins says there are 18 groups providing platforms in Australia, but by 2004 he believes this could drop to as few as five.
“There are also 21 software providers and I cannot see all of them surviving,” he says. “They will need scale to survive.”
Collins says the Australian financial services industry is very inefficient and that situation will have to change as returns fall. The growth of the industry, however, may hamper moves to make it more efficient.
Wraps and master trusts will also have to improve in the next few years, Collins says.
“Current wrap and master trusts are expensive. They don’t handle non-unit investments and there is no straight through processing,” he says. “At some stage, the client will say they want more freedom to move in their master trusts.”
Collins sees the financial services industry in Australia fragmenting, with more overseas players entering.
“We will be seeing different types of distributors …. and it is happening right now,” he says. “Stockbrokers, superannuation funds and solicitors are all getting into financial planning. More than half the superannuation funds are now doing financial planning.”
Collins also sees sectors like general insurance moving into financial planning, as they expand their licences under the Financial Services Reform Bill.
This growth of people giving advice will lead to products being turned into commodities and financial planners educating clients and preparing plans for them.
However, clients won’t be free agents, he warns. Superannuation funds, accountants and brokers will provide all their financial services needs.
“If a small to medium-sized enterprise needs a general insurance broker who can look after all their needs, they won’t use a planner,” Collins says.
“There will be a lot more competition in financial planning and segmented services in the future.”
