Financial planning firms that have not yet moved away from commissions are showing increasing interest in merging with firms that have already made the transition to fee-for-service, broker firm Centurion Market Makers director Wayne Marsh has said.
“With the proposed deadline to ban commissions on investment and super products looming, a number of principals have been considering whether they want to sell and exit the industry or explore other options,” Marsh said.
“We’ve noticed an increasing amount of inquiries in the last six to eight months from principals contemplating whether they should merge with a practice that has already made the transition to fee-for-service.”
The benefits to merging with a practice that had already moved away from commissions included that it already had the intellectual property, no time would be lost redefining the offer, and the firm would have prior experience communicating the change to clients, he said.
“A merger in this instance can assist a practice in migrating faster and because there is existing knowledge and experience in making the transition, it can provide invaluable assistance as the firm won’t come across the same challenges,” Marsh said.
Centurion expected to see more practices partner or merge with firms that had already made the transition, particularly as the proposed deadline to ban commissions wasn’t far away.
“Advice is fast becoming a scale game, so there will also be merger benefits such as having more funds under management and better revenue in order to deliver better quality outcomes to clients,” Marsh said.
Practices would not only be able to take advantage of scale, cost and succession benefits, but it could also mean reduced costs for dealer groups as there would potentially be fewer smaller practices requiring services.
