Financial planners take stock

The financial planning industry assembled last week for its annual conference. Mark Beyer reports on an industry striving to lift its game.


BEN Devenish, chairman of the WA chapter of the Financial Planning Association, doesn’t mince his words when describing the state of his industry.

“It’s the most challenging environment that financial planners have faced ever, there is no doubt about that,” he said.

Two years of weak or negative investment returns, increasingly stringent regulation and a damning ‘shadow shopping’ survey by the Australian Securities and Investments Commission and the Australian Consumers Association have conspired to make life difficult for planners.

While the picture is not uniformly grim, some of the country’s biggest dealer groups have been forced to grapple with extra issues.

AMP Financial Planning, for instance, has needed to deal with the fallout from its parent company’s financial and regulatory problems.

RetireInvest faced the embarrassment of having to give an enforceable undertaking to ASIC after an investigation found sub-standard compliance and disclosure.

Count Wealth Accountants, the country’s third largest dealer group, summed up the pressures facing the industry when it reported moderate income growth for the half-year to June 30.

“There were several reasons for this – but poor market conditions, increased expenses associated with PI [professional indemnity insurance], systems development and our new AFS [Australian Financial Services] licences are the major reasons,” it said in a statement.

Count also experienced a 7.5 per cent fall in the number of franchisees over the half year, a change it attributed to a tightening of quality as part of the process of obtaining its AFS licence.

“We’ve used that as an opportunity to ‘clean up’ a few people,” Count managing director Barry Lambert said.

“In earlier years we focused more on quantity, now we focus more on quality. We are being tougher.”

Mr Lambert said Count had also changed tack with its Compound dealer group, which targets non-accountants but has achieved little success since being launched two years ago.

It will focus on new financial planners and start-up businesses instead of trying to lure established financial planning practices away from their existing dealer groups.

Other dealer groups have continued to grow despite the difficult conditions facing the industry.

Professional Investment Services, Australia’s second largest dealer group, has about 100 financial planners in WA, up from 26 four years ago.

Business development manager Darren Joseph said accounting firms were finding it very time consuming to be involved in all of the compliance tasks associated with financial planning.

“Unless they are in front of a client, they aren’t earning a dollar,” Mr Joseph said.

“They need to outsource it or get someone in to do it.”

Another dealer group enjoying rapid growth is AFG Financial Planning, a division of mortgage broker Australian Finance Group.

AFG director Steve McGurk said the group had gone from zero to 13 financial planners in WA this year, and was looking to triple the number over the next two years.

“A lot of planners recognise they need to look at what their dealer group offers them,” Mr McGurk said.

“Most planners spend way too much time in the back office doing paperwork.”

Greg Devine, managing director Godfrey Pembroke Exchange Plaza, has just opened new practices in Sydney and Adelaide.

Mr Devine’s three practices employ a total of 26 financial planners and 65 staff.

“My practice can cover all parts of the market,” Mr Devine said.

“We offer a broader range of products, and we service executives, middle management and the workplace. We have achieved huge growth because of that.”

Mr Devine said that, while most financial planners were chasing high-income clients, less than 5 per cent of his clients would be deemed ‘high net worth’.

“The rest is middle Australia and that’s a great market.”

He said a theme of last week’s FPA conference was the “absolute focus back on quality advice for clients”.

Planners would also need to focus more on being problem solvers rather than “product pushers”.

“That will be a big change for some planners that won’t be able to manage that,” Mr Devine said.

“It’s up to the consumer also to shop around to get the best advice.

“The consumer has as much responsibility in the process as anyone else.”

FPA (WA) chairman Ben Devenish, a principal of West Perth firm Gannon Growden Schonell, said client education and empowerment was an important focus.

The industry itself was also seeking to lift standards, with the Financial Planning Association rolling out a series of initiatives to achieve more structured and consistent disclosure of fees and commissions, improved communication and quality assessment, and upgraded qualifications and certification.

Mr Devenish said there was no doubt financial planning charges would rise to cover the increased regulatory and compliance costs.

Industry participants have until March next year to obtain their AFS licences and speculation is rife about the impact of this process.

“With all the licensing, everyone is waiting until the music stops to see who is sitting where,” Mr Joseph said.

AFG’s Mr McGurk expects smaller dealer groups will look closely at the cost and the risk of holding their own licence, and may be attracted to a larger group.

The licensing process has also triggered major changes among some of the biggest dealer groups.

St George Bank’s Sealcorp is in the process of folding its Pact dealer group, which was launched 10 years ago to service accountants, into its Securitor dealer groups, which traditionally targeted financial planners.

“There were two distinct channels ten years ago,” said Dan Powell, Sealcorp’s director of distribution and sales.

“Rather than keep the two brands, we are putting the two brands together and using the savings to provide better services.”

Mr Powell said Sealcorp serviced 82 proper authority holders in WA, with 32 in Securitor, 29 in Pact and 21 “dealer-to-dealer” clients who had their own licences.

He said the number of proper authority holders had grown by 8 per cent per annum over the past two years, with most of the new people going into Securitor.

ING is another institution to have consolidated multiple dealer groups.

As well as RetireInvest, it merged several groups into Tandem Financial Advice last year.

This poses the question of whether other institutions with multiple dealer groups will merge the multiple brands.

There is no shortage of merger candidates, with AMP, AXA Asia Pacific, Commonwealth Bank and National Australia Bank all owning multiple dealer groups.

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