2021 adviser flight to better quality licensees predicted
Financial advice licensees who have not changed their business models to account for the loss of platform rebates and other arrangements at the end of the year will be at risk of losing financial planners.
That is the assessment of Centrepoint Alliance chief executive, Angus Benbow who believes his firm’s decision to move early and reset its service offering will stand it in good stead to grow adviser numbers as the industry moves into 2021.
The company is also looking to provide wholesale services to self-licensed advisers or other licensees.
“We were one of the first to reprice and reset the service offering and that has resonated in the market and we have continued to pick up interest in what is a fragmented industry,” he told Money Management following the release of Centrepoint’s full year results.
He said he believed that there would be a “flight to quality” by financial advisers with some already looking to move.
“I do think we’ll now see movement from advisers looking to move on from their existing dealer groups and that comes from two reasons – one is that a lot of licensees business models will change from the end of this calendar year because there are no rebates and any legacy arrangements have to go,” Benbow said.
“That will drive a repricing – we’ve done that and we’ve been very transparent about that. I’m not sure that all of our competitors have gone through that process so there does come a natural pricing pressure where they’ll have to go out to their advisers and reprice which ought to prompt advisers to say well, ‘if I’m going to be paying X to licensee B am I getting value for money?’,” he said. “I do believe that that’s going to drive a broader movement.”
Asked about what represented an optimal number of advisers for Centrepoint, Benbow refused to be drawn but said that the company was “not prepared to compromise on the quality of the adviser and their compliance just to drive growth”.
“We’re looking for quality advisers coming into the business for the right reasons,” he said.
“What we’ve seen over the last 12 to 18 months is that advice businesses are really strengthening but advisers need to think about their businesses as a business – its no longer a distribution/aggregation play.”
“You have look at a license as necessitating having a stand-alone business that is viable and ultimately it means taking on a lot of risk and that comes with financial capital risk and it also now comes with personal and legislative risk for the directors of those licenses,” Benbow said. “I think those are things that will play a role in attracting quality advisers given the strength of our capital structure and our compliance.”
“I’m not saying we’re not chasing 1,000 advisers but where I think we might end up is with 500 advisers under license and 500 really engaged self-licensed advisers but its about building a sustainable business where we’re not taking on too much risk from a quality of advice perspective,” he said.
Recommended for you
Having sold Madison to Infocus earlier this year, Clime has now set up a new financial advice licensee with eight advisers.
With licensees such as Insignia looking to AI for advice efficiencies, they are being urged to write clear AI policies as soon as possible to prevent a “Wild West” of providers being used by their practices.
Iress has revealed the number of clients per adviser that top advice firms serve, as well as how many client meetings they conduct each week.
Morningstar has made two business development appointments to drive the growth strategy of its financial advice software, AdviserLogic.
