As it turns out, 2018 was the last year during which the big four banks were a major influence in financial planning.
2019 was the year in which the banks definitively headed for and used the wealth management exit doors and 2020 will be remembered as the year during which their exit became complete with National Australia Bank (NAB) finally managing to unload MLC Wealth to IOOF.
The implications of the banks’ exit are now made clear in Money Management’s latest TOP Financial Planning Groups research which reveals an industry dominated by mid-scale players such as Centrepoint Alliance and Countplus with the only remaining large-scale players being AMP Limited and IOOF. And even then, AMP Limited has signalled to the market that it is still reflecting upon its future.
Importantly, with the exit of the major banks, the financial planning industry has also substantially waved goodbye to large-scale vertical integration notwithstanding the fact that AMP continues operate in the banking, funds management and superannuation space while IOOF has funds management, superannuation and, more recently, asset management interests.
As well, groups such as Fiducian continue to operate a vertically-integrated structure, but on a basis much more modest than that which was pursued by the major banks.
But it is not just the financial planning businesses which have changed hands, a number of the major platforms are now out from under major bank control with the MLC platforms moving under the IOOF banner, while private equity outfit KKR has a hefty stake in the Colonial First State platforms and speculation is swirling around Westpac’s intentions with respect to the future of BT Panorama.
As our TOP Financial Planning groups coverage points out, all this is happening at the same time as thousands of financial advisers are exiting the industry motivated by a range of factors including changed remuneration structures, minimum degree-level education requirements, the Financial Adviser Standards and Ethics Authority regime and the Life Insurance Framework.
This tapestry of change is occurring at the same time as research from groups such as Investment Trends is telling the consistent story that demand for financial advice is growing and that it is likely to continue to grow with superannuation funds and robo-advice providers playing an increasing role.
So, the question should be: what will the financial planning sector look like in five years’ time?
On the available evidence, the exodus of financial advisers is probably already close to reaching its peak and the resumption of growth in adviser numbers over the next half-decade will be driven by two key factors – future regulatory approaches pursued by Federal Government and the success or failure of the commercial models put in place by the major licensees.
What is already certain is that financial planning is down but not out. It remains a highly competitive environment as evidenced by those still willing to make strategic investments and the manner in which licensees aggressively try to attract good advisers and good advice businesses.
But if there is one message the industry needs to send to Government it is that the financial planning industry now needs to be given room to succeed; and that success will be made unachievable under the dead weight of layer after layer of regulation and cost.
