Sole financial planning practitioners will have to merge their practices in order to survive the challenges from the global financial crisis (GFC) and regulatory change, according to a dealer group head.
"I believe the sole practitioner will be challenged in this environment. Unless they can generate sufficient revenue in niche markets, the sole practitioner will have to look at ways to merge in order to survive," BT Financial Group head of dealer groups and licensee select Neil Younger said at the national Securitor convention in Adelaide yesterday.
"Bigger businesses will be part of the landscape because they are the ones that will be able to deliver, through a corporatised structure, advice under the right economics," Younger said.
The upcoming changes in regulation would require financial planners to become more specialised, making it more difficult to operate as a sole practitioner, he said.
"Take the national consumer credit codes - there is a new set of requirements needed to operate effectively in this space across the business. There is more time and effort that is expended before you even get to the component of delivering advice," Younger said.
"Service providers that actually build in that level of specialisation and deliver that effectively will have that competitive advantage over those that don't."
Younger expects that the changes in the industry will see many planners leave the industry.
"We expect that 30 per cent of advisers will leave the industry over the next two to three years," Younger said.
"Some look at the implementation of the changes and will decide it is not for them," he said.
But he expects that Securitor will be able to benefit from the consolidation in the industry, as the dealer group is able to offer the support to switch to a corporate model.
"We see consolidation towards institutional dealer groups," Younger said.
Securitor is looking to grow its authorised representative numbers from about 470 to 600 over the next 3 years, he said.
The GFC has also created further obstacles for sole practitioners, as professional indemnity (PI) insurers have adopted more stringent requirements that demand a more corporatised business model for planners, Younger said.
"PI insurers are applying more scrutiny to activities in this sector and risks will need to be effectively managed," he said.
