The numbers game

Dealer groups continue to poach advisers from each other, although a number of advisers are seeking more independence.

MB and Associates Mark Birrell says while dealer groups chase the same planners, there are some commendable initiatives by the major groups.

“Groups such as AXA and AMP have been buying back clients and re-selling them, which is creating great opportunities for planners wanting their own business,” he says.

“However, it has also been used to attract advisers from other dealer groups.”

Succession planning

Birrell says they also hope to create a pathway for young financial planners who are coming into the system to own a practice.

“What young planner has $4 million to buy a practice?” And he adds:“It is also a way for middle-aged planners to create succession planning for the practice. Dealer groups that recruit younger planners are providing a long-term strategy for succession planning.”

Birrell, whose consultancy advises dealer groups on succession planning strategies, says many new advisers are going to work at accounting and legal practices.

“To keep the value proposition attractive to the planner, the bigger dealer groups have to bring in younger advisers who will eventually take equity through the business,” he says.

“This creates opportunities to package equity arrangement for advisers joining the group early on, before the business changes hands,” he says.

According to Birrell, it could take five years before the succession strategy is put into place, but when it is established, the value of the dealer group will be protected for another 15 years.

“We will see planners wanting to move out of the institutions because they want equity positions in the practices they work in. The institutions are not seeing this happen, which creates the opportunities for other dealer groups to recruit good planners.”

Another reason behind the departure of advisers from institutions is the realisation that getting an Australian Finance Services licence is not that difficult.

“Getting a licence for many young planners is seen as being no different to a lawyer getting their practice certificate.”

Referrals only

But some dealer groups have no trouble attracting advisers.

Meritum Financial Group chief executive Brian Dau says the eight planners it has attracted this year were all through referrals.

“We don’t advertise for planners and a lot of the people are just referred to us. Some come to us because they want to run their own practices under their own brand.”

Dau says the dealer group, which is just over 12 months old, is very selective about who it recruits.

“We are more interested in getting people to suit the business, rather than just building adviser numbers,” he says.

“Meritum will still continue to grow, we will have 80 planners in two months time, but we just want referrals, as the quality of the planner is better.”

However, growth figures can be misleading. National Australia Bank, which tops the fastest growing groups list, achieved the placing due to an internal restructuring, a spokesperson says.

“We have included advisers working in private banking, business and specialist areas in our retail adviser network.”

Attrition rates

But as groups grow, some lose planners.

Count Financial has reported one of the biggest falls in the past 12 months. Managing director Barry Lambert says this attrition was deliberate as the dealer group is reassessing the quality of its advisers.

“We are deliberately running down our advisers numbers. Those who do not meet our professional standards are being let go,” he says.

“Count has been lifting its standards before FSR was introduced and some advisers who haven’t met that standard have been encouraged to go elsewhere”.

Lambert expects the number of advisers in Count to decline further next year as it realigns the dealer group.

“I admit we have some people who should have never been in Count,” he says.

Breakaway groups

Sometimes one practice leaving a dealer group can have a significant impact.

Winchcombe Carson Financial Planning lost 16 planners last year.

“The core reason for our fall in adviser numbers was due to the Queensland practice leaving to get its own licence. That took 12 planners out of the numbers,” IOOF head of dealerships Scott Monotti says.

However, the dealer group has attracted a significant number of new advisers aiming for high-value style of financial planning, according to Monotti.