Boutiques delay growth plans due to FOFA

While bank-owned dealer groups aggressively increased their adviser numbers in the last few years, non-aligned financial planning businesses have had to put serious brakes on their growth plans due to preparations for the Future of Financial Advice (FOFA) reforms. 

The Money Management/DEXX&R 2013 Top 100 Dealer Groups table, due to be published later this month, shows a number of mid-tier dealer groups either keeping their adviser numbers steady over the last 12 months or decreasing them somewhat.

For example, Capstone Financial Planning had no change to its 70 adviser-strong network, while Risk and Investment Advisors Australia only increased the number of its authorised representatives by three over the last year.

The numbers tell a similar story for other groups working in the independent mid-size space.

Gold Financial has 61 advisers in its network this year, only one up from 2012, according to its managing director Bernie Toohey.

"Running around and recruiting just for the sake of recruiting is not the answer," Toohey said.

"FOFA has been very time consuming. You've got to work closely with your software providers, you've got to get your templates up to scratch, you've got to educate your existing authorised representatives for the whole new world — fee disclosure statements, best interest duties — it's changing times."

The biggest challenge to the smaller boutique licensee, in Toohey's view, is having the staffing resources to be able to provide stringent monitoring and adviser supervision.

Gold Financial has two practice development/compliance managers working closely with the financial planning practices operating under Gold's licence.

"When you've got 25 practices per development manager, they get a pretty good handle on the practices, they can monitor them well and make sure that they're doing the right thing, but I don't know how some of these firms with 250-300 advisers are able to do that — and that's probably been a problem with a couple of them out there," Toohey said.

In fact, a number of groups have had their licences cancelled by the Australian Securities and Investments Commission in the last few months, many of them due to compliance issues and poor adviser supervision.

AAA Financial Intelligence and Perth-based Addwealth in particular had serious issues with their compliance and monitoring arrangements, according to the regulator, with the then Commissioner Peter Kell warning against aggressive adviser growth.

A couple of businesses - like Queensland-based WB Financial and Business & Estate Planning Specialists — folded their Australian Financial Services Licences and sought shelter under Commonwealth Bank-owned Financial Wisdom.

However, large institutions have been able to focus on growth amid FOFA preparations, with Guardian already reaching its 200 adviser target before 2015, while the big four banks engaged in years-long turf-war in the lead-up to the FOFA start date.