Speaking at a lunch in Sydney yesterday, Minter Ellison partner Chris Brown said there has been a ‘flight to quality’ in recent years as financial planning firms have migrated towards the big institutional players.
Minter Ellison acted for Count Financial when it was acquired by the Commonwealth Bank in late 2011.
But the merger and acquisition (M&A) activity by the four banks and AMP/AXA is now at ‘saturation’ point, with the industry largely consolidated, said Mr Brown.
“That [M&A activity] has gone away, and it will probably be a long time before it comes back again. There aren’t that many decent targets left out there,” he said.
As for what is ahead for the industry, Mr Brown likened the financial advice sector to the sea: the tide has come in to the beach, and it will soon go out again.
“My sense is that in the coming period – it might be a year or two away – we might see a pullback of that ‘flight to quality’ and a reformation of non-aligned dealer [groups],” he said.
“How’s that going to happen without the support of ‘big brother’ behind you? I suspect there is some foreign money looking to invest in this space,” said Mr Brown.
With the Australian dollar weakening and the US dollar strengthening, he said there is likely to be foreign investment “right across the wealth management value chain – whether it’s administration, funds management or advice”.
Mr Brown also took aim at the previous Labor government for its apparent intent to “over-regulate” retail financial services.
“FOFA, it’s probably fair to say, has been [the most] challenging a reform affecting retail wealth services ever in this country,” he said.
“You talk to operators in this space overseas and they are agog with what’s happened in terms of the standard of regulation which has been imposed on retail wealth,” said Mr Brown.
The financial services industry has spent the last two-and-a-half to three years dealing with FOFA, and that isn’t likely to stop anytime soon, he said.
“When people tell you FOFA has been and gone and it’s all back to normal, that certainly is not the case,” said Mr Brown.
