Targeting the affluent pays off

The success of a dealer group is often measured by adviser numbers.

However, examining the assets of the dealer group — that is, the funds under advice and the productivity of each individual planner — can provide an alternative indication of business strength.

The table outlines the average funds under advice (FUA) per financial adviser, and shows that only 14 groups in the Top 100 had an average FUA higher than the sector average of $300 million.

Looking at the top 10 names, it is apparent that planners are more likely to have a higher FUA where they are a member of a boutique or smaller dealer group.

Large dealers tend to offer a wider range of advice to a broader audience, thus reducing their overall average, even if the group contains specialist practices in, say, the high-net-worth market.

High-net-worth clients

This year, Perpetual Private Clients is ranked at number one, with an average FUA of over $1 billion. While part of the Perpetual Trustee Group, the financial advice offshoot has only 23 advisers.

According to Scott Riedel, head of private clients, their strategy is based on targeting high-net-worth individuals.

“Perpetual has been very strong in the retiree, older clients market. Given the ageing population, I think that’s a good area to be in. But given the life stage of our trust business, where we have a lot of beneficiaries of estate money, we can also offer services to beneficiaries and wealth accumulators,” Riedel says.

Centrestone Wealth Advisers, at second place, has an average of $900 million per planner.

According to CEO Robert Keavney, “clients would have net worth of $1 million to $1 billion, although it goes without saying that of the people with $1 billion, we don’t have much of their money, because our total assets under advice are $1.5 billion”.

But he adds: “We are delighted to have a client with a million dollars. We think we can provide good quality service at a profit there. But if someone came in with $300,000, what we’d say is ‘look, we would love to help you, but these are the minimum fees we would have to charge and we’re sure you would agree that there’s got to be better value for money elsewhere’. We’re just not set up to service that market.”

Average FUA at the Berkley Group matches Centrestone, and the two organisations recently announced a merger.

Tim Marshall, principal of the Brisbane office and group director, explains the firm’s strategy to date: “We work on the basis that there’s only so much time in the day, so we want to spend that time as productively as possible. So that means we should be focusing on people with money.”

Customer service

For both Centrestone and Berkley, the average number of clients per adviser is kept to a minimum of around 80 — extremely low compared to organisations such as AMP and Professional Investment Services, which have 500-plus per planner.

Keavney adds: “By looking at the number of planners and number of clients, those figures will tell you if someone is in the tailored, high-quality business, or in the mass production business.”

At Perpetual, the figure is slightly higher at 95, but still significantly below the industry average.

As such, all three groups maintain they are able to offer a much higher level of service to their customer base.

Keavney explains: “If you’ve got lots of clients, you can’t be providing detailed service. Our costs to service a client would be much higher than industry costs.”

Range of advice

For organisations such as Guardian Financial Planning, the profile of advisers means average FUA will always be lower than the likes of Perpetual and Centrestone, and it is the group’s strategy to maintain its more generalist approach.

Steven Browning, national manager of advice networks, explains: “Because we have a mix of general practitioners — some will be doing risk business, some super, some wealth management — I suspect that’s why the averages per adviser look a little lower compared to the market.”

The average FUA at Guardian is $100,000 per planner, alongside groups such as Count Financial and Professional Investment Services — two of Australia’s largest dealer groups.

Guardian aims to grow its current pool of 157 advisers, but Browning says monitoring average FUA is unlikely to be a focus.

“We don’t spend a lot of time doing that because our measure of adviser isn’t just on funds; we probably take a more holistic view in measuring advisers’ value.”

He adds: “We tend to measure it on pretty broad productivity measures, so we measure total gross revenue from advisers, which cuts across revenue or commissions generated from risk insurance, super, wealth management or investment placement and platforms.”

Nor is Guardian likely to turn away clients.

“Advisers will obviously choose their clients, and they’ll choose the markets in which they work. But obviously it’s going to be those clients who are seeking broad-based advice. It’s really in that mass middle market,” Browning says.

Recruitment

Whether dealer groups have an active growth strategy or not, recruiting new advisers and practices is part and parcel of natural turnover.

So how does a group such as Centrestone maintain such a high FUA per planner?

According to Keavney: “The last three acquisitions all had something in the order of a $100 million dollar book of clients. So instead of new advisers joining us and pulling the average down, they actually lifted it.”

So would a group such as Guardian target practices aimed at high-net-worth customers in order to increase FUA?

Browning says while Guardian would “never say never”, it would depend on what value those advisers are looking for.

He explains: “The sort of advisers who are attracted to our offer are those who give a broad range of advice, not a specialist wealth management practice with high-net-worth clients who have $20 million to invest. People who are looking for tax-effective measures on Jupiter and property syndicates on Mars are probably not our target market.”