Reality bites for financial planners

Contrary to publicity suggesting Australian financial planners are earning substantial six-figure salaries, new research published within Citigroup suggests that most planners are on average generating about $120,000 a year in servicing customers.

The figure is contained within a Citigroup Wealth Management Insights paper obtained by Money Management, which argues that one of the key goals for dealer groups over the next few years will be maximising planner productivity.

The Wealth Management Insights paper, written by Nigel Pittaway and Craig Williams, argues that institutions had developed a renewed focus on planner profitability rather than sales following the forced removal of buyer of last resort.

It said that with many supply side factors constraining growth in planner numbers, improving planner productivity would be essential for many aligned dealer groups to maintain the status quo.

However, in looking at which dealer groups were handling the changing situation best, the Citigroup research paper said that, at the moment, AXA’s ipac was the “stand-out in terms of institutionally-owned dealer group productivity, with an estimated $43 million in funds under advice per planner, well ahead of our calculated average for aligned planner groups as a whole of $23 million”.

The research estimated AMPFinancial Planning to be slightly above the average for institutionally-owned dealer groups with around $24.7 million per planner, allowing planners credit for 20 per cent of AMP’s corporate superannuation funds under management.

The researchers said they estimated an average institutionally-owned planner generated around $120,000 in revenues from servicing customers who accessed retail master trusts.

“This does not leave much to spare to invest in growth, highlighting the profitability issues,” they said.

Elsewhere in the research report, the authors claim that the cost of advice provision is continuing to rise, both as a result of the implementation of the Financial Services Reform Act (FSR) and the regulatory oversight provided by the Australian Securities and Investments Commission.

Furthermore, they said that since 2001 the total number of planners within the Top 100 dealer groups had grown only marginally at around 2 per cent a year.

The researchers said that since FSR there had been hardly any acquisitions of distribution businesses among the major institutions and that, ironically, the recent growth in the independent financial advice market had been as a result of aligned planners, fed up with being held back by the tail end and a bias to serve to the lowest common denominator, breaking away from larger dealer groups.