Large and small players take the high ground

An examinationof theMoneyManagementTop 100 dealer’s survey rankings would suggest that the industry has shifted from a time of deals and jockeying for position to a time of consolidation.

Of course there has been some large scale moves within the rankings but on the whole, the time since the last Top 100 dealer’s survey has not been punctuated with massive acquisitions by large players seeking to gain distribution.

Rather, since the last Top 100 results came out, there has been two linked trends developing. Smaller or boutique dealers have grown, as have the larger groups, consolidating their positions, while the mid-sized groups have stalled.

The reasons for this are evident when considering that last year’s survey was punctuated by the moves of the banks into financial planning.

Since then they have brought their full force to bear on a wide customer base and are providing products and advice to the ‘mums and dads’ style client. This sector of the market is well within their core demographic but outside that of dealer group based advisers.

Other larger dealer group players who do not offer banking have been making similar inroads as the banks but through the provision of a wide range of services such as planning combined with insurance, margin lending or direct equities investments.

On the other hand, the boutiques have always targeted high-net-worth clients as a way of standing out from the pack and providing services that can not be found in other places, such as venture capital investments.

The upshot of this is that while the mid-sized dealers may be in sound shape, compared to the upper and lower ends of the table, they have stalled.

Many groups may have chosen not to actively grow. Yet for those who planned on expansion and did not achieve it, they probably failed to respond to the growth opportunities available or did not offer services that planners considered worthy to offer to their clients.

Whether the failure of the consolidators to make an impact in this year’s survey is part of that is open to question but it is clear they have not been the Promised Land that many planners were seeking.

Those who freely entered into one of the few listed consolidators may feel uneasy over their future, given the hammering the stock prices of those vehicles have taken in recent months.

Add to this the massive spend needed to draw the disparate elements of these groups together and the need to do that quickly and efficiently to maintain adviser and client loyalty, the past year has lost some of its lustre for such groups.

On the other hand, the usual suspects in terms of dealer groups have maintained the status quo for another year.

Across the full set of rankings, planners based around life groups have continued to maintain their stake, still hovering around a third of the overall advisers in the rankings, while the banks also hold around a third of financial planners.

But as the table bears out, there has still been some subtle shake ups in the rankings with a number of big names losing planners. Why did this happen?

No doubt the coming of the Financial Services Reform Bill (FSRB) had an affect, as did the Alienation of Personal Services Income (APSI) reforms. Combined with the industry’s next favourite topic, Interim Policy Statement (IPS) 146, there was bound to be some movement of planners, either into other groups or out of the industry all together.

The banks would now be starting to work out what they actually need out of their recent purchases and any excising of extra staff would also be reflected in this year’s survey.

If the trend really is for the consolidating of position for dealer groups, what does this mean for the future?

Last year this column wrote that the job ahead for the banks was to integrate their newly acquired planning arms to ensure planners remained and continued to attract clients and therefore funds under advice.

The new challenge is for all groups to continue to do so. Given the current state of global markets and persistent rumours of poor economic times ahead, fuelled by a hangover from the tech wreck and recent events in the US, planners may not want to be looking at heading out the door without the promise of a new desk and new job elsewhere.

Whether planners stay with a dealer group out of concern about finding their next job or because they are part of a viable group making the best of times that are not, should prove to be an interesting set of circumstances.

Money ManagementEditor,

Jason Spits