Institutions dominate advice distribution

WhenMoney Managementpublished its first ever list of Top 50 Distributors last year, it was instantly apparent just how much the large financial institutions dominated the delivery of financial advice in Australia.

This domination shows no signs of abating. The upper echelons ofMoney Management’ssecond annual list of top 50 distributors reads like a who’s who of financial institutions in Australia — anyone from the big four banks, to funds management giants and Goliaths of global insurance.

Of the top 10 owners of financial advisers, all but two — Professional Investment Services (PIS) and Count Financial — are large-scale diversified financial institutions.

The top 10 owners in turn, through their array of wholly or partly owned financial planning dealer groups, account for more than 76 per cent of all financial advisers in the Top 50 list, highlighting the prolific nation-wide reach of such groups.

AMP, Australia’s largest retail funds manager, was once again confirmed as the single biggest distributor of financial advice in the country.

The funds management giant, with its two dealer groups — AMP Financial Planning and Hillross Financial Services — finished first in the Top 50 list for the second year running.

The number one ranking for AMP came despite the group recording a drop in planner numbers from 1,848 in 2000 to 1,803 planners in 2001.

In this period, AMP eschewed the rapid growth policy, which had made it the biggest adviser network in Australia over recent years, for one of consolidation, which included the integration of the last of the GIO planners who moved across to AMP in 2000.

“We have spent the last year settling in new advisers and not looking at new planners. This year, however, will be very much about growth again, for both AMP Financial Planning and Hillross,” AMP director of advice and services Steve Helmich says.

The renewed focus on boosting planner numbers may not be enough to guarantee AMP a spot at the top of next year’s list of major distributors of advice.

The National Australia Bank (NAB) group, just two year’s after its acquisition of MLC, has made a notable push for distribution prowess over the past 12 months, recruiting more than 330 advisers across its seven dealer groups to propel itself into second position.

The growth in planner numbers, if it continues at the same pace over the next year, could see NAB (currently with 1,684 planners) upset AMP as the biggest network of financial advisers in the country.

The Commonwealth Bank (CBA) on the other hand, which had held second position ahead of NAB last year, slipped back into fourth on this year’s list with 525 less planners.

The dramatic drop in planner numbers for CBA was for the most part a reflection of an error in the figures supplied by the bank last year. Those figures included employees who were proper authority holders but who did not have a full-time planning role within the bank. These employees were not counted this year.

The concentration of a high proportion of all planners in groups such as AMP, NAB and even CBA, highlights the increasingly obvious divergence of the financial planning landscape into two distinct poles, with the very big institutionally owned planning groups at one end, small boutique groups at the other, and very few groups in between.

The vast majority of groups in the Top 50 list either have more than 500 planners or less than 150 planners, indicating a dearth in the number of what can be defined as mid-sized networks of advisers.

This polarisation of planning groups in the Top 50 suggests a natural evolutionary cycle for planning groups: boutique-planning networks grow to become mid-sized groups and become attractive to larger institutions. They are bought out and take most of their advisers with them. Eventually, some of those advisers break away, forming their own boutique planning groups, and the cycle continues.

This very scenario was played out last month when 11 planners from the Godfrey Pembroke dealer group — now owned by the NAB group — broke away to set up their own dealership, Vector Financial Consultants.

The group’s managing director, Rob Taggart, says the breakaway was a response to increasing disillusionment amongst advisers of life under the auspices of a major institution.

“If a large institution, like MLC or NAB, buys a group, it is naturally going to want financial planning consultants to support products or platforms it is interested in. The consultants felt they were losing their voice,” Taggart says.

Perhaps the only major groups in this year’s Top 50 to buck this trend are PIS and Count, both of which have resisted the urge to amalgamate with larger institutions, despite exponential growth in recent years.

In fact, PIS, which increased the number of planners in its network by 764 to 1,230 over the past 12 months, was the fastest growing group in this year’s Top 50.

The growth was the result of a very deliberate policy of expansion, involving a string of acquisitions as well as aggressive planner recruitment.

PIS’s chief executive, Robbie Bennetts, says the group has now reached a critical mass where it can start to leverage off its planner numbers to offer services and products traditionally in the domain of larger institutions.

The group, which launched its own master trust last year, has also announced plans to develop its own funds management arm, Ventura Investment Management.

“We now have what I like to think of as the means to production and we are making the transition from distribution to institution,” Bennetts says.

In other words, according to Bennetts, PIS’ aim is to bypass the large institutions and instead turn what was once a network of financial advisers into a diversified financial institution in its own right.

But only time will tell if the group can resist whatMoneyManagement’sTop 50 Distributors suggests is an increasingly natural urge to merge.