Small advice firms networking is ‘powder keg waiting to explode’
As adviser numbers shrink and compliance costs increase, smaller advisories will form networked partnerships, sharing knowledge and technology to help them drive down costs, according to Viridian Advisory.
Speaking to Money Management, Glenn Calder, chief executive at Melbourne-based Viridian Advisory, said there were a lot of companies with mismatched product and advice solutions which could benefit from these networks.
He said the networking of smaller firms was a powder keg waiting to explode and he predicted the phenomenon would accelerate in the first half of next year.
“We would have seen four businesses approach us in the last month or so just saying ‘we’re too small to go it alone, maybe we should band together’ – so it’s already happening right now,” Calder said.
He said smaller firms had no choice but to act on technology solutions as rising costs and a shrinking advice industry meant smaller firms were “heading down a highway that ends”.
According to data from research house Adviser Ratings, adviser numbers were estimated to drop to 13,000 by the end of 2023, a 53% decline since the commencement of the Hayne Royal Commission.
Data from KPMG showed the average cost to produce advice was around $5,335 while the average adviser only charged $3,660.
Calder said those firms who were too small to merge with larger ones or who were not able to chase high-net-worth client niches could be left behind if they failed to adopt technology innovations.
According to Calder, Viridian had benefitted enormously from the sharing of knowledge and technology between firms in the BT Principal’s Community – Westpac’s network of advisers which would shut down its operations in mid-December with many members expected to join Kon Costas’ ‘The Principal’s Community’.
These networks would develop technology, product and advice solutions and share the costs across members, driving down overall costs for smaller firms which would be passed onto the consumer, said Calder.
AUTHOR
Liam Cormican
Recommended for you
Following an extraordinary general meeting today, Dixon Advisory parent company E&P Financial Group’s shareholders have voted on its proposed delisting from the ASX.
While overall financial adviser numbers have dipped below 15,500 this week, Rhombus Advisory is experiencing growth and approaching 500 advisers in its ranks.
Iress’ Xplan continues to dominate the financial planning software market with a multitude of uses, according to Netwealth research, despite newer players battling for a piece of the pie.
ASIC has shared the percentage of breach reports related to financial advice in FY24, noting increased reporting by smaller AFSLs.
