Australia’s financial services industry should anticipate restructuring, exits and opportunities at the dealer group level as it continues to work through the details of the federal government’s Future of Financial Advice (FOFA) reforms.
Minter Ellison partner corporate mergers and acquisitions Christopher Brown said the advisory market in the wake of FOFA will experience a fundamental change, with the potential for market fragmentation and the creation of “true independent” dealer groups.
“I suppose the difficulty is without the support of fund manager subsidies in the future, the profitability and the value proposition of going it alone is less compelling so there are headwinds,” Brown said at a media luncheon in Sydney yesterday.
“At a practice and small dealer group level I think there are opportunities for scaling up and buying out those who are perhaps looking to exit the industry creating a franchise model and in fact industrialising and segmenting your clients.”
He said the industry changes would stem from FOFA but also from the global financial crisis and an aging planner demographic.
Consolidation at the dealer group level is also likely to continue, particularly as the advice industry scrambles to adapt to an environment not reliant on volume payments.
“The industry chat is we’ll just have to capture margin which was previously paid to us by selling [product],” he said.
“Now there is no reason why they [dealer groups] shouldn’t set up their own products, their own platforms, their own funds and the like but I suppose if one of the policy objectives was to ensure small peripheral players like Storm didn’t sort of repeat themselves then query whether forcing advisers into the manufacturing space is the way to achieve that particular policy objective.
“But it’s certainly an option that is being discussed and is being looked at and in some cases being put in affect. So that’s one option. The other is to effectively merge with or be acquired by institutions.”
