Brokers marshall forces to tackle planning market

The Money Management 1999 Dealer Survey highlights just how fast some stockbrokers are growing their financial planning capabilities and re-engineering their businesses to meet the market’s challenges.

The Money Management 1999 Dealer Survey highlights just how fast some stockbrokers are growing their financial planning capabilities and re-engineering their businesses to meet the market’s challenges.

While a number of broking firms declined to disclose their figures to Money Management’s researchers, the signs are clear: brokers are a bur-geoning force to be reckoned with.

Hartley Poynton emerged in the survey as the biggest broking player in the financial planning industry with a whopping 175 planners.

According to the survey, it is the 23rd largest player in the financial plan-ning industry, outstripping the likes of Hillross Financial Services, Asso-ciated Planners and Godfrey Pembroke in terms of numbers of planners.

Next up was Morgans Financial Planning with 65 planners followed by Macquarie Equities with 24 and JB Were with 15.

While not directly listed in the survey, Ord Minett has 25 planners and Merrill Lynch Private has 10.

And, all these brokerage houses have flagged aggressive plans to grow their numbers and financial planning capabilities.

From being a small Western Australia-based regional stockbroker, Har-tley Poynton has more than trebled its financial planning over the past two years.

It now has 30,000 clients who are serviced from 12 offices around the country and it has funds under administration of $500 million.

And, while the ASX-listed broker has been hiring and training financial planners, director of private client services Lawrence Deer says the most rapid growth has come from recent acquisitions of full service investment advisory firms.

He says Hartley Poynton is still on a recruitment drive, but the market would have to soften before it makes another acquisition.

Morgans, which recently merged with Todd Partners in Adelaide, has been involved in financial planning since 1988, but this side of its busi-ness has particularly blossomed after a restructuring in 1996, which led to the creation of Morgans Financial Planning.

Morgans now has a combined stockbroking and financial planning client base of 180,000 people.

There’s also been a lot of activity at Macquarie Equities. Along with Macquarie’s fund management arm, it was recently merged into Mac-quarie Financial Services (MFS) which provides private clients with a single point of entry to the group’s services.

MFS has said it will hire more planners, but it has also built its planning capabilities through the acquisitions of broking firms Day Cutten, Porter Western and Nevitts.

JB Were, Australia’s largest retail stockbroking house, expects to add around 15 additional financial planners over the next six months. It al-ready has 15, most of whom were sourced in-house.

As part of a drive to turn itself into a “multi-financial service” provider, Were launched a new financial planning service - Were Strategic Plan-ning - in October.

The service’s head Chris Tant says Were’s planners will team up with its 170 investment advisers, most of whom have stock broking backgrounds, to offer a much more specialised advice service than traditional financial planning.

Merrill Lynch has also been hiring as part of its move to reposition itself as a total financial solutions firm. In August, it launched a new initiative, called Merrill Lynch Private.

Co-head Peter Capp says the group now has 10 planners, which it calls financial consultants. It expects to add around 16 more by year end and about 36 at the close of the year 2000.

The financial planning activity from stockbrokers is yet another confir-mation of the ever growing convergence in the financial services indus-try.

No doubt it is also a sign of the pressure the broking fraternity faces from growing direct and Internet stock trading services and in the wake of the market’s swing from commissions to fee-for-service.

Many brokers, however, see their financial planning moves as just a re-sponse to demand from customers.

“We are building (up our financial planning capability) because we be-lieve that it is an important additional service that many of our clients re-quire,” says Charles Moore, head at private client investment services at Ord Minnett.

“We are not building financial planning at the expense of retail broking. We are growing another business and we are not replacing the one we’ve got,” he says.

Capp adds: “We want to cater for all people. Some people will need eq-uity advice, others will need other advice.

“The future of the financial service industry will not be to offer one line, but a lot more and financial planning will be part of this.”

Tant concurs. “Financial planning is a logical direction for broking houses. It is an expansion of what they are already doing,” he says, noting that financial planning is just one part of the paradigm.

“Clients are becoming much more educated and understand that they have to have assistance, not just in one area, but in many areas.

“They don’t want someone who is just flogging investments. They want a relationship with someone they can trust and who covers their wider needs.”

Deer agrees, adding that people also want to be able to pick the degrees of service level they get.

Looking to the future, Tant expects stockbroking to be part of the busi-ness of the larger broking houses in time to come. But, he says, not eve-ryone in the market will offer the full spectrum of services.

“Some may find that they will do better if they specialise in their area and become niche players who team up with other players,” he says.

There may be a trend towards fee-for-service stockbroking, especially in the US, but Moore believes it will take a long time before this is fully de-veloped in Australia.

Instead, he expects a healthy mix between fees and commissions to pre-vail in this market for some time.

TOP STOCKBROKERS

Hartley Poynton 175

Morgans 65

Ord Minett 25

Macquarie 24

JB Were 15

Merrill Lynch 10

Potter Warburg 4

Todd Partners 4

Burrell & Co 1