Reform uncertainty hampering infrastructure investment

The lack of clarity about the Future of Financial Advice reforms may be hampering investment in processes and infrastructure, but it hasn’t necessarily affected growth, according to Shadforth Financial Group head Tony Fenning.

Shadforth has engaged in a program of growth since its 12 fee-based firms merged in 2008. Fenning conceded that in the current environment of regulatory uncertainty it was difficult to decide where best to invest time and money into improving services and processes. Fenning said that while the reforms had paved the way for higher level changes, such as fiduciary duty, the next layer of detail was needed to enable the group to determine whether it was worthwhile investing more in remuneration technology, whether it should establish a wrap account and engage in funds management, or whether it would be better off outsourcing and buying scale products from bigger groups.

“That’s a critical decision that we’re very conscious of, and we need more information to decide which components of the value chain we should participate in,” said Fenning.

He said while this uncertainty was not necessarily hampering Shadforth’s growth plans, it might impact later on since the failure to make investments now could hold things up in a few years’ time.

Despite the pressures, Fenning said Shadforth was confident there were opportunities. He added that the company aimed to take advantage of the large number of small practice owners looking to exit the market.

“We think there will be a lot of people exiting the industry over the next five or 10 years, and that’s not so much because of the regulatory changes — although that will certainly speed it up,” he said, adding that it was more a result of the current demographics of the industry as many advisers neared retirement age.

Fenning said a lot of the older planners were concerned about their clients and staff, and he felt Shadforth could differentiate itself and provide an attractive home.

Fenning acknowledged that the banks were powerful competitors, but was positive that “the pendulum will swing”.

“The banks are in ascendancy at the moment because they have bought all the good competitors that have reached a considerable size, and then they have learnt out of that to get better,” he said. “But the pendulum will start swinging the other way because there will always be bright, young people that innovate and come up with something more valuable to clients and become segmented to meet particular client needs. There’s going to be more accessible advice and more innovation, and technology will be a key because the cost of advice will be an issue.”