Big planning firms are set to dominate if the market becomes increasingly regulated.
A market duopoly will occur in the financial planning industry if future regulatory conditions make it more difficult for small advisory practices to operate, according to the Boutique Financial Planning Principals Group (BFPPG).
The role of smaller, boutique, independently-owned financial planning firms and their continued presence in the market was vital for the continuing quality of advice in Australia, BFPPG president Claude Santucci said.
"The analogy is if you make things difficult for us you will end up with the same situation in Australia where you've basically got a Woolworths and Coles running a duopoly and everybody else scurrying along behind them, and we all suffer as a result because you're removing competition," Santucci said.
Shadforth Guest McLeod private client adviser Chris Taylor said the risks were too great for small financial planning firms to own their own licence in today's regulatory environment.
"Since 2004, when ASIC brought in all the new regulations, I don't believe you can run a small business in this field any more," Taylor said.
Paragem Dealer Services managing director Ian Knox said the introduction of the Financial Services Reform Act was heralded by institutions as the deathbed for small advice businesses, due to the complex regulatory environment and compliance costs.
"Yet despite this, the planning market has adapted quickly and new businesses such as ours have made the transition easier by providing a shared services model with high levels of back office support and expertise at a fraction of the cost," Knox said.
"Paragem has assisted with over 40 new AFSLs [Australian Financial Services Licences] this past year and looks after over 180 AFSLs, which indicates a strong trend to SME [small to medium enterprise] ownership, despite the so-called scale benefits of mega dealer networks."
He said the size of a dealership did not guarantee economic stability unless there was a balance sheet behind it that could be used for survival.
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