Speaking at last week’s Wraps, Platforms & Masterfunds conference, IOOF general manager of distribution Renato Mota responded to a question about changing adviser demographics, claiming recent changes are likely more cyclical than people realise.
“Whilst we have seen a contraction of the mid-size dealer groups and independent groups, I think there will be a re-emergence of the independents. And I think it will largely be led through technology-based efficiencies,” he said.
Mr Mota said it is “naïve” to think the market will eventually contract into five or six institutional pillars but added that would not necessarily be a bad thing, with efficiencies to be gained.
“One of the really attractive qualities about our market here in Australia is the diversity. Whilst that might contract temporarily, it will come back,” he said.
Association of Financial Advisers board member and Integra Financial Services practice principal Deborah Kent said concerns over the disappearance of independent advice are a “knee-jerk reaction”, with the current wave of boutiques handing in their licences to join banks being driven by Future of Financial Advice changes.
A range of boutique and larger licensees is better for the consumer, she said, but added that larger licensees can offer greater consumer protection, with some mid-tiers that have recently gone bust, such as AFS Group, turning out not to have adequate professional indemnity insurance.
The Australian Securities and Investments Commission needs to do more to ensure smaller licensees are adhering to all their requirements, Ms Kent said.
IRESS senior business development executive Michael Kinens said we are already seeing an increase in the number of advisers looking to branch out from institutional ownership.
“The number of advisers that are part of a larger network wanting to go out on their own has probably been stronger than it has been for a while,” he said.
“The number of conversations I’m having, at this point in time where you’re struggling with all the things you’re struggling with, is it sensible to be thinking about going out and creating your own licence? But people are determined, the enquiries from existing clients that are wanting to break away from their dealer group are interesting.”
However, Custom Wealth Solutions chief executive Chris Appleyard said commercial decisions played a strong and unfortunate role in driving advisers away from non-bank licensees.
“When you sit down with one of the practices and you say, ‘why did you go across to the bank?’ [they say,] ‘because they’ve got four times buyer of last resort, because who the bloody hell’s going to buy my business, you?’” he said.
“These are the real problems we have that actually influence it and that’s really bad behaviour,” Mr Appleyard said.
“Unfortunately, sometimes these people that would love to go out and set up a value proposition that’s entirely independent of the banks to delineate themselves can’t [do so] because they’re scared they won’t have anyone to sell [their practice] to and they’re not going to make any money and won’t be able to achieve any value out of it.”
