The continuing evolution of financial planning dealer groups
Money Management’s Top 100 Dealer Group data has underscored the re-emergence of institutions as the dominant force in Australian financial planning.
Money Management has been publishing its Top 100 dealer groups data for well over a decade, but few iterations of the research have revealed as much change as this year - 2012.
What the data confirm is the re-emergence of institutions as the dominant force in Australian financial planning, as evidenced by the fact that 19 of the top 20 dealer groups are either institutionally-owned or linked.
This is hardly surprising, given the mergers and acquisitions which have occurred over the past two years, with the most recent manifestation being IOOF's acquisition of Plan B and the most significant change being the Commonwealth Bank's acquisition of Count Financial.
In fact, in many respects, Money Management's Top 100 dealer groups data reflects the fulfilment of a prophecy - that the Government's Future of Financial Advice (FOFA) regime would give rise to the vertical integration of the industry.
Those with long enough memories might even reflect that it is a case of back to the future - a financial planning industry almost entirely dominated by the major banks and AMP.
However, while the FOFA changes have undoubtedly acted as a catalyst for change, they have represented only one part of the equation.
Just as important has been the impact of the global financial crisis and the manner in which this has altered the dynamics of the platform industry.
Over the past quarter of a century, platforms have represented the key driver and revenue source for the growth which has occurred in the financial planning industry.
It follows that the severe changes to fund flows resulting from the global financial crisis have combined with restrictions on remuneration models inherent in FOFA to fundamentally alter the industry.
Thus, readers of Money Management should not only seek to understand who ultimately owns and controls financial planning dealer groups, but the platforms their planners are using and who owns those platforms.
When the Commonwealth Bank decided to acquire Count Financial its motivation for doing so was not only about bringing Australia's largest independent accountant-based financial planning group under its umbrella - it was also about distribution, the sale of the bank's product set and the continued success of Colonial First State platforms.
Similarly, the Australian Competition and Consumer Commission was not entirely off-target when it rejected National Australia Bank's bid for AXA Asia-Pacific based on the ultimate implications for the platform market.
Of course, the changes indicated by the Top 100 data should not be interpreted as spelling the end of smaller or mid-size dealer groups, but what is obvious from the data is that the most successful of those smaller and mid-size groups are those which have pursued business models not substantially reliant on platform rebates.
The dealer group world has changed, but the evolution is continuing.
Recommended for you
In this episode of Relative Return Unplugged, hosts Maja Garaca Djurdjevic and Keith Ford are joined by special guest Shane Oliver, chief economist at AMP, to break down what’s happening with the Trump trade and the broader global economy, and what it means for Australia.
In this episode, hosts Maja Garaca Djurdjevic and Keith Ford take a look at what’s making news in the investment world, from President-elect Donald Trump’s cabinet nominations to Cbus fronting up to a Senate inquiry.
In this new episode of The Manager Mix, host Laura Dew speaks with Claire Smith, head of private assets sales at Schroders, to discuss semi-liquid global private equity.
In this episode of Relative Return, host Laura Dew speaks with Eric Braz, MFS portfolio manager on the global small and mid-cap fund, the MFS Global New Discovery Strategy, to discuss the power of small and mid-cap investing in today’s global markets.
