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.