Advice sector getting tougher for independents, more consolidation expected

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Market observers say more consolidation of big and small adviser groups can be expected this year as smaller businesses struggle to deal with increased regulation.

OneVue CEO Connie McKeage says the regulations are being forced more heavily on independents, and that “the government is trying to put small business out of business”. Running a dealer group is becoming more and more difficult, she says, and smaller businesses are being forced to look at whether they should allow themselves to be bought by the large organisations.

“We don’t know an independent financial planning business that has not had or been under regulatory scrutiny now for 6, 12, 18 months and you don’t see or hear the same degree of scrutiny taking place within the large organisations or the in-house planning groups,” she says. “There is an inconsistency that’s pretty obvious between what the government says it’s trying to achieve and its actions.”

The increased consolidation is having a flow-on effect on consumers, who are losing confidence in the sector and becoming increasingly self-directed customers, says McKeage. Last week the industry body representing the Australian mutual sector, Abacus, called for an independent review of the Australian banking system, accusing it of being too imbalanced and dominated by larger players.

Meanwhile, AFA CEO Brad Fox says the increased consolidation is not just because of regulations, but also due to the changing motivations of licensee owners. “Some of them have built up wonderful licensees and perhaps it’s their step to retirement to sell it…There’s no one simple answer,” he says.

Licensee models haven’t been very profitable for advisers looking for a lot of service, and that’s why larger banks are on the hunt to bring more advisers into their network and in turn, sell more of their products, says Fox.

  • Rob Coyte on 27/02/2013 7:59:02 PM

    We are small licensee and want the benefits of not being aligned with institutions however we are being institutional like with back office and processes.

    Shartru Wealth is looking to grow with people that have the small licensee philosophy but appreciate we need to compliant and efficient

  • viewsxew (Eric Walters) on 26/02/2013 2:20:49 PM

    ARs and CARs of the larger Dealer Groups are similarly not rushing to the exits as I see it. We heard all these stories regarding sole practitioner accountants back in the early '90s - and would you believe it, they are still abounding in the suburbs, regional cities and small towns all over the country.
    Stay true to your clients (and to your business): we will get through all of this pounding by the over-zealous lawmakers in Canberra!

  • frank smith on 25/02/2013 11:47:22 AM

    Great comments Pat (even with the typo) Yes check the regulatory scrutiny out and add to it product collapses many through fraud.
    Long live the indepenents - the industy's only hope.

  • Pat on 25/02/2013 11:23:53 AM

    I am just glad no-one has corrected my typo!

  • Concerned on 25/02/2013 10:14:22 AM

    For sometime now you have been telling us independents won't survive!! But why is our small boutique, self licenced, independent business growing and prospering? We see people wanting personal advice and service that has no influence and bias priced fairly. The bigger the big guys get the better my business becomes.

  • Pat on 25/02/2013 8:43:34 AM

    Let me guess, these comments are buy someone who is trying to drive down the value of great, small, independent firms so they can acquire them cheaply.

    Speaking only for myself: we are a true independent boutique who have had no regulatory issues at all. FOFA will place only marginal cost pressures on us, if at all, and we continue to grow profits year on year.

    If you want to look at regulatory scrutiny, have a look at:

    1. AAA Financial [Un]Intelligence
    2. Macquarie Wealth EU
    3. CBA/Financial Wisdom EUs
    4. And many others.

    Before publication such as this one posts illinformed comments or, worse, deliberately misrepresentations, they should seek evidence based clarification.

  • Another Mad Planner on 25/02/2013 10:47:47 AM

    Pat and Concerned - I agree totally with your comments.

    Pat, as someone who is also self licensed in the last year I have found that business has grown due to the advice provided due to no product influence.

WP forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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