It’s going to be a bumpy ride

Dealer groups with smaller numbers of planners again seem to be maintaining their hold on high-net-worth clients, according to this year’s Top 100 survey.

The bigger dealer groups have chased a larger number of clients to grow their funds under advice (FUA), while the boutiques are satisfied with making their planners work harder by managing clients with more funds to invest.

Some of the rankings in the top FUA per client list are not surprising. Arrive Wealth Management, the former PricewaterhouseCoopers financial planning arm, has a small number of clients with a high entry level for use of its services. The 19 planners look after $1.1 billion of clients’ funds, so the average client balance is high.

Out of the top 10 dealer groups ranked by FUA per client, three are private. This is encouraging for planners who want to work outside the big distribution networks of the banks and fund managers.

However, half of the top 10 are owned by the big distribution networks, with only one bank — National — appearing in the list with Godfrey Pembroke.

In the past 12 months, the top figure of FUA per client has also doubled to $2.1 million. Last year, JP Morgan topped the list with $1 million of FUA per client. The group did not submit a FUA figure this year, so dropped out of the table.

Holding second place last year was Tynan Mackenzie with $666,667 FUA per client. The drop in ranking this year could be explained in the increase of the number of planners the dealer group has. This figure rose by a third.

Some dealer groups, such as Perpetual, have remained static, while others dropped off the top 10 due to the overall rising figures. Last year the cut-off for the top 10 was $144,000 FUA per client. This year the cut-off has risen to $203,000 FUA per client, indicating dealer groups are winning more clients and that more investment monies are passing through planners’ hands.

The higher cut-off saw Mercer ($187,500 FUA per client) miss out on a place in the Top 10 and the highest-placed bank was St George, with $77,000 FUA per client.

The highest placed National dealer group was Apogee, with $58,000 FUA per client, while ANZ had $29,000 FUA per client. It is believed some dealer groups, such as those run by the banks, include all clients who are sold some financial services product. This can range from an investment portfolio to deposit accounts and this would skew those figures to lower FUA per client.

The top dealer groups by FUA per planner present a much more varied picture of which planners are handling the high-net-worth clients.

Most of the entrants inMoneyManagement’stop 10 this year are new to the list.

The large distribution networks do not dominate the list, with only one bank, Bank of Western Australia, making an impact in 10th position. Two privately owned dealer groups also make the list.

Some groups appear on the list for the first time due to acquisitions. The Investor Group’s Prescott Consultants has been on an aggressive acquisition trail in the past 12 months and it has now achieved a respectable FUA per planner figure of $50 million.

Again, the qualifying figure to enter the Top 10 has risen compared to last year. Last year, $38 million FUA per planner secured a 10th position. That figure has risen to $50 million FUA per planner.

However, the top figure has fallen in the past 12 months from $160 million FUA per planner to $151 million.

Last year’s top dealer group, ipac Securities, has dropped to $31 million FUA per planner compared to $160 million last year.

The top dealer groups in 2001 by FUA per planner generally have all seen their figures fall, and as a result, fail to qualify for the Top 10 and slide into the Top 20.

The exceptions were Mercer, which almost doubled its FUA per planner in the past 12 months, and Godfrey Pembroke, which saw a slight increase from $40 million FUA per planner to $42 million.

One of last year’s listings, Wilson Dilworth, has dropped out of the Top 100 altogether, so was eliminated from the FUA per planner list.

The remaining 2001 entrants suffered falls in FUA per planners as follows:

• Gannon Growden — $41 million ($68 million FUA per planner in 2001);

• Perpetual — $45 million ($57 million);

• Tynan Mackenzie — $37 million ($50 million);

• Bridges — $45 million ($49 million);

• Whittaker McNaught — $36 million ($40 million);

• Retireinvest — $34 million ($38 million).

The bank dominance on distribution has not translated in achieving a large FUA per planner.

National’s Godfrey Pembroke was the top performer of the distribution groups owned by the Big Four banks.

ANZ achieved $29 million FUA per planner, while Westpac planners had $15.25 million FUA.

Having the largest number of planners doesn’t always translate into FUA. Professional Investment Services (PIS), number two in the Top 100 based on the number of planners, almost comes last in the FUA per planner tables, with a figure of $4 million.

However, one area were the banks and fund managers still dominate is the top dealer groups by FUA.

Four out of the top five positions are taken by these distribution giants and overall they take seven out of the top 10 places.

PIS has grown its FUA from $4.2 billion last year to $5.3 billion in 2002. Count rose from $5 billion in 2001 to $5.4 billion this year.

Apart from ABN AMRO topping the list for the first time, Westpac achieved a significant jump in FUA in the past 12 months. In 2001, it had $9.5 billion, which has grown to $11 billion 12 months later.

Departures from the Top 10 list included ipac Securities, which dropped from $5.7 billion FUA in 2001 to $1 billion this year. Apogee’s FUA fell from $5.5 billion in 2001 to $3.5 billion this year and that resulted in this dealer group dropping out of the Top 10.

By the timeMoney Managementcomes to produce the Top 100 next year, it is expected there will be many more dramatic changes.

This year’s survey is based on figures achieved in what we now know as the end of the halcyon days of the current business cycle.

Planners and principals in the past month have been indicating clients are now looking to remove their investments from managed funds, spooked by the poor performance figures.

It is expected that by this time next year, some dealer groups will lose significant FUA, which will cut fees. This inevitably will lead to a drop in the number of planners employed by the dealer groups. Principals will now be looking at how much business individual planners bring in as they review their overheads.

Principals have toldMoney Managementthat clients are questioning fees and most have not absorbed the “don’t panic” advice amid the falling markets.

Principals have also toldMoney Managementthat poaching of clients is starting to become more common as new leads dry up.

Clients are unlikely to recommend friends if their own investment portfolios have fallen. They are blaming the planner for the drop in performance, since this is the first point of call, and this has cut referrals. Some dealer groups are reporting a complete collapse of referrals and new business leads.

In any downturn, however, there will always be winners and in this case, it’s the dealer groups that have been operated ‘mean and lean’ that will survive.

The banks will probably benefit from any economic downturn, as redundancy cheques taken to the branches will be referred to the in-house planners to advise how to invest the funds.

Up until now, the financial planning industry has grown unbridled by other market restrictions. The next 12 months will be crucial as to whether this growth will continue during an economic downturn. While there might be related business such as handling redundancy payouts, the downside is some planning groups will lose clients who can no longer afford the fees and who need their investments to pay for day-to-day expenses.

As Bette Davies said in the filmAll About Eve: “Hold on to your hats, it’s going to be a bumpy night.”