Steady as it goes is the message

If therewas one phrase to illustrate what this year’s Top 100 has revealed, it would have to be “steady as it goes”.

The past 12 months in the world of financial advice and planning has been a busy time, with the usual suspects of the Financial Services Reform Act (FSRA), Policy Statement 146 and September 11 all impacting in their own way.

This is not to say the round of mergers, acquisitions, breakaways, successes and failures has been absent, but most dealer groups were content to keep both hands on the tiller for the time being.

But the numbers belie what is really going on in the data. According to this year’s figures, the size of the industry held within the range of the Top 100 has grown.

What this means is that either the industry has grown by at least 600 planners, or that those who are covered by the Top 100 have grown to the exclusion of others.

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It is fair to say there has been an element of both of these factors, as the number of advisers in the biggest and smallest planning groups in the Top 100 has remained relatively unchanged since 1999.

Examining that first survey now, the message of the time was clear and it was confirmed in the second Top 100 survey in 2000, in fact, it was the opening headline — ‘The banks have landed’.

Even back then, the industry knew that event had and still was occurring, but the Top 100 in 1999 and 2000 confirmed the best and worst suspicions of many people. The part of the industry said to be the least personable was moving into an industry that depends on very cordial relationships between its practitioners and its clients.

There is no doubt the banks have since consolidated their place in the provision of financial advice and are setting about building greater influence, but their rampant takeover of the advice market has not happened just yet.

In 1999, the number of advisers working within bank-owned distribution was 22 per cent of the Top 100, this year it is 35 per cent, which equates to about a three per cent increase each year.

Compare this to the level of planners within funds management group-owned distribution, also at 35 per cent, dropping from 50 per cent of the Top 100 in 1999.

But the real impact of the takeover of the industry by large scale institutions comes in the fact that of the 34 per cent, or 4,800 planners held by banks within the Top 100, nearly all of them are held by the big five alone — National Australia, Commonwealth, Westpac, ANZ and St George.

These five banks boast 4,470 planners alone out of the 4,800 planners working for bank-owned distribution networks, with the likes of Macquarie, Bendigo Bank and Suncorp Metway making up the balance.

Compare this figure then to the planners working through funds management groups — about 4,760, or 34 per cent of the Top 100.

But the real difference is that the funds management-based planners are spread between 29 dealer groups and the bank-based planners between 25.

Figures relating to planners working within independently or privately owned groups show about a third of the industry at 30.5 per cent or 4,300 planners in the Top 100, but are spread between 42 dealer groups. Given this, the banks do seem to be getting on with their plans, as are all the institutional players in the market.

But if observers are looking for signs the past 12 months have crunched dealer group numbers, this has not become evident. As already stated, overall numbers are up and while there has been movement, it has not been out of the market as widely predicted but from one dealer group to another.

Once again, the banks have accounted for much of the movement, consolidating their planning arms to achieve scale while in some cases picking up outside groups to distribute product, but content to leave them at arm’s length.

In fact, the greatest move in the Top 100 this year have been Professional Investment Services adding 175 planners and Commonwealth Financial Planning, which now includes Commonwealth Personal Bankers and Commonwealth Investment Consultants which lost 138 planners. The next biggest moves were 78 new planners with ANZ and 111 fewer planners with Commonwealth Financial Solutions, who have been through a drastic restructure of the group’s planning arms in the wake of the Commonwealth’s purchase of Colonial.

And what of the effect of the FSRA on financial planners and life advisers? Well it seems news of their demise has been much exaggerated, at least for now.

Those planners working through groups with a strong life insurance background, most notably AMP, AXA, ING, Royal & Sun Alliance and MLC, still make up 4,533 financial planners or 32 per cent of the industry. This figure has remained reasonably unchanged since last year’s survey.

So given this mixed report card is it still fair to say that continuity and stability has been the overriding trend within the Top 100 over the past 12 months?

The answer would seem to favour the positive. The Top 5 groups remain unchanged in their ranking since last year, while the Top 10 only has one entrant from outside that number, with ANZ planners moving up from 14.

The Top 20 has also gone through little change with only two new entrants, Suncorp Financial Advisers from 27 last year and Hillross from 22 last year.

Further evidence of the continuity in the industry has been that only six dealer groups from last year failed to make the cut, while 19 dropped off last year. Only nine new entrants joined the table this year, down from 23 last year.

Continuing with these trends, what can we make of the coming year and the possible make up of the Top 100 in 2003?

To answer that it is worth remembering the industry is part-way through a number of major shifts, including the transition to FSRA and the much talked about polarisation of advice towards the big end of town at one end and the boutique, niche practice at the other.

Neither of these two shifts have become overtly evident in the Top 100 but they will. The number of planners with banks and fund managers will get bigger while the number of dealer groups they hold will decrease.

Planner numbers will increase as the banks are acknowledged as good training grounds for the new blood, which the industry needs if it is to expand in the future.

Dealer numbers will go down because the banks are always on the search for scale, and the recent moves by the Commonwealth to merge its three planning arms and the two held by Colonial First State make it obvious that myriad distribution arms don’t fit in with large scale bank distribution.

At the smaller end of the market, both the number of planners and dealers will increase as some of those who work for large institutions look at providing advice in different environments and as the levels of breakaway groups continue to grow.

So if anything, consider this year’s figures as full of promise and that by the time you read next year’s Top 100 the industry will not be travelling towards a new destination, it will have arrived. It will be looking to make its mark and the ever present themes of institutions, breakaways and independents will be played out again.