Countless independent firms are being forced to move their business to larger dealer groups, as they struggle to keep up with increasing costs from regulatory demands. Over the past 12 months, three large members of the Association of Independently Owned Financial Planners (AIOFP) have been lost to institutional buyouts. Smaller groups are tending to sell to their peers and remain members though, says AIOFP director Peter Johnston.
Despite this increased consolidation in the sector, research shows that demand for independent advisers is still high. CoreData’s latest survey revealed that, of respondents who received financial advice, 33.4% preferred non-aligned advisers, followed by 24.9% using aligned advisers and 12.5% using accountants.
Johnston says the AIOFP has seen a 50% increase in corporate and consumer demand in assessing members for advice over the past 12 months. “Consumers are more educated today and can recognise the difference between an institution selling their products and an independent offering a service,” says Johnston.
“The frustration consumers are finding is trying to identify an independent adviser as aligned advisers are allowed to masquerade as independent advisers… Why ASIC dispensed with the need for all institutionally aligned advisers to display their owner’s details on business cards and all marketing material is very confusing.”
But independents are still struggling with increased costs and regulatory demands. “All practices have experienced a down turn in revenue over the past 5 years with clients running scared of equities and demanding cash options.”
More than 90% of the industry is cross subsidised by either platform revenue or SMSF set up and audit fees, says Johnston. “For the true independents to survive going forward they have to adjust their business model to capture a share of the administration revenue by either offering SMSF’s or entering into an independent vertically integrated business model.”
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