Financial planning industry still highly competitive
Despite the largest institutions holding almost half the market share, the financial planning industry remains highly competitive, according to a report published by IBISWorld.
The Financial Planning and Investment Advice in Australia report found that the big four banks along with AMP comprised 47.4 per cent market share in the financial planning world.
However, competition in the market is not decreasing, the report noted.
"There is competition in the industry between financial advisers for clients and between the distributors of financial products or platforms for financial advisers to distribute their products," the report said.
Independent financial advisers compete on the basis of their independence - large instos compete on the basis of reputation, returns and lower cost access to wholesale funds.
Furthermore, suppliers of investment products are competing for the funds of financial adviser clients.
"With the industry having experienced a shortage of qualified financial planners, there is also competition between financial institutions and dealer groups to attract financial planners," the report added.
"Dealer groups compete for staff on the basis of support services provided by planners."
While competition for the business of financial advisers may still be based on the size of commissions, there may also be non-money rewards and recognition for the volume of business an adviser attracts.
However, fees charged for investment advice will become a greater point of competition.
"The recent fall in the return on funds under management may emphasise the importance of fees to some clients, increasing the importance of financial adviser fees as a point of competition," the report added.
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