Uneven ride for dealer groups on the back of FUA

There are some common threads when looking at the top 50 dealer groups’ funds under advice (FUA). (see table p44.)

AMP is the largest group based on this figure, now looking after $41 billion, however, this is down from the $50 billion it looked after in 2002. The group’s FUA has ridden a roller coaster since then, rising and falling, probably as a result of the company’s much publicised troubles over superannuation recommendations.

During the past five years the big institutions have dominated the top distributor lists and FUA.

Commonwealth, NAB, ANZ, Westpac and AXA have appeared in the top 10 places with FUA in billions rather than millions.

The privately-owned dealer groups tend to have smaller amounts of FUA, which reflects the more specialised nature of the operation.

These groups do not have the brand-pulling power that a Commonwealth Bank has, which secures new clients on a daily basis.

But groups such as Matrix have grown from $800 million in FUA in 2002 to $2.2 billion this year, which illustrates the institutions don’t always have it all their own way.

The big institutions have always been the source of planners breaking away to form new dealer groups, although they usually don’t take much FUA with them. But there are exceptions.

In February 2004, Meritum was formed when a group of advisers and management broke away from Commonwealth Bank-owned Financial Wisdom. In its first year of operation the group boasted $1.5 billion of FUA.

The group has expanded and recruited advisers from other dealer groups and today FUA stands at $2.3 billion, proving good advisers can bring in funds.

With any review over a period of time, dealer groups disappear for a variety of reasons.

Some are corporate plays where the parent cleans up the structure. AXA for example rolled its disappointing Altus brand into its other two dealer groups.

IOOF was part owner of Financial Partnership, but that has now been rolled back into the group and then merged with long-standing dealer group Winchcombe Carson to form Consultum.

IOOF’s FUA has plunged from $2.2 billion in 2002 to less than $800 million last year and no figure has been supplied for this year.

Stockford, which was a mixture of financial planning and accounting practices, went into receivership despite over $41 billion in FUA. It was a classic case of the wrong structure and creating a business that was not profitable.

Another common thread during the past five years has been dealer groups chasing experienced advisers to bring in more FUA.

The fact dealer groups are chasing the same advisers, increasing their offers to lure them, suggests it has only had limited success.

Certainly, there seems to be a flow-on effect of advisers leaving the large dealer groups to join boutiques, while the institutions top up their numbers with advisers fresh out of university.

The end result is the institution’s FUA continues to grow with usually about the same number of advisers.

The fact the financial planning pie is getting bigger with the growth of superannuation monies means expanding FUA is being spread around to all groups.