Advisers depart as top ten feel the pinch

If confirmation of the ‘cleansing’ nature of recent regulatory and legislative changes was needed then this year’s Top 100 Dealer Groups will provide clear evidence, with all of the top 10 groups and 14 of the top 20 losing planners since the last survey in October 2003.

In fact, financial planning as a profession suffered a sizeable blow, with the total number of advisers in the Top 100 dropping for the first time in its six year history from last year’s high of 14,338 advisers to 13,079 this year, a net loss of 1,259.

On a percentage basis the change is a downward movement of 8.9 per cent, effectively negating the growth of the adviser market in this survey over the last two and a half years.

The biggest losses have come from Commonwealth Financial Planning which slid from 660 advisers to 417, down 243, and Professional Investment Services which dropped 167 advisers moving from 1,309 in 2003 to 1,142 this year.

Despite the losses, PIS retains its second place ranking for the fourth year in a row while AMP Financial Planning remains the largest dealer group in the market with 1,318, down 115 from the 2003 figure of 1,433.

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A number of other groups throughout the table saw their rankings climb despite the loss of advisers. Westpac losing 63 advisers and Securitor losing 40 advisers benefitted from the losses in other groups to still climb from six to four and seven to six in the rankings respectively.

Other losses were less obvious with 16 different dealer groups in last year’s table not responding for requests for data for this year’s survey.

After further examination, five groups had either changed names or merged with other dealer operations held by a parent group and one had moved out of the advisory space with its advisers transferring within the market.

The last 10 were ‘missing in action’ — that is no longer listed on the Australian Securities and Investments Commission (ASIC) register of Australian Financial Services licensees while leaving no forwarding address either.

Despite these changes the bottom line figure of slightly more than 13,000 advisers in the Top 100 is still a sizeable number.

Last year, Wes McMaster at the RMIT University School of Economics released findings confirming the anecdotal numbers of 18,000 financial planners in Australia and if the general reduction in the Top 100 is extrapolated then FSRA has reduced adviser ranks to 16,400 — a loss of 1,600 advisers.

There is no doubt this change in size and demographic of the market has been driven by the FSRA, which has been the biggest agent of change in the market since its inception, and while there has always been adviser turnover, the introduction of compulsory benchmarks under the new regime has for the first time halted the growth trend (see table 1).

This fact is very clear when examining the amount of advisers held by the Top 10 Dealer Groups and those held by the institutions, with both sets of data showing substantial losses.

The Top 10 Dealers all managed to hold onto a spot in that space (see table 2) but there were some moves with Commonwealth Financial Planning sliding from 4th to 7th position after losing 243 planners since the last survey.

Other sizeable losses were AMP shedding 115 advisers, continuing the downturn in numbers from last year’s 1,433 and from the 2002 high of 1,470 advisers. Professional Investment Services (PIS) registered its first loss of advisers in the survey, dropping 167 down to 1,142, while AXA lost 141 advisers moving down to 498.

In numbers terms the Top 10 moved from 7,479 planners in 2003 to 6,551 in 2004 with the total loss across the Top 10 Dealers of 928 advisers, equating to nearly 74 per cent of the total drop in adviser numbers in the Top 100 for this year.

The drop in adviser numbers across the Top 20 Dealers was only 592, falling from 9,824 to 9,232, bolstered by a big gain for ING-owned Millenium 3 which added 266 advisers as a result of a restructure of the ING-owned dealer groups.

Banks as a proportion of owners of advisory groups came off the worst with losses of 820 advisers — that is moving from 4,346 advisers to 3,526, or 26.96 per cent of the market from 30.3 per cent in 2003, with the number of advisory groups also dropping from 16 to 13.

Fund managers fared better, dropping only 265 advisers from 4,699 to 4,434 advisers, but boosting the percentage from 32.8 per cent last year to 39.9 per cent of the market this year for the loss of only two dealer groups from last year’s 23.

While the losses in the area of groups privately held, listed, held by directors, advisers or a combination of those was less than the banks at 655 advisers, for a small percentage shift down from 35.8 per cent to 31.2 per cent of the market, the number of groups dropped from 54 to 40, reflecting the seachange occuring in small to medium sized planning practices.

These groups had their high water mark last year when adviser numbers peaked at 4,735 while this year’s numbers were 4,080. The climb from 4,300 in 2002 to last year’s figure and then the drop to this year’s is indicative of the number of advisers who moved into other groups during 2002 and 2003, while others have stepped out of the market, due to the arrival of the FSRA.

It would be too easy to see these numbers as part of a extended downward period for financial advice providers given the losses also seen in some groups in last year’s Top 100 survey, but even with those losses adviser numbers hit an industry high in 2003.

Yet make a note of 2004 and the numbers presented above because it is unlikely that they will be repeated on the same scale for some time to come.

Financial advice has always been a burgeoning industry and while the last 12 months may have hastened the day of retirement for some it will not stop the growth and demand for good financial planning. It may take a while but next year’s numbers will clearly show this market on the rebound.