TWO Perth financial planning firms are part of a group of 12 adviser groups nationwide that are now trading under the banner Shadforth Financial Group, and will seek a unified listing when market conditions improve.
TWO Perth financial planning firms are part of a group of 12 adviser groups nationwide that are now trading under the banner Shadforth Financial Group, and will seek a unified listing when market conditions improve.
Local adviser groups Keysbrook Financial Services and Gannon Growden Schonell were rebranded Shadforth on July 1. They sit alongside big name east-coast financial planning offices Guest McLeod and Heraud Harrison, and several others, which have also changed their names.
Former Keysbrook owner turned Shadforth state manager, Simon Joyner, claimed it was hard for small planning offices to survive in the highly regulated market.
"In an ideal world everyone would like to stay small, but in order to compete you have to have scale," Mr Joyner said.
The principals of the 12 groups have swapped their business stakes for a proportional share of the merged entity, which uses its increased buying power to reduce costs on items such as research, professional indemnity insurance and portfolio construction services. The group is also merging its administrative duties to reduce expenses.
Australia's financial planning sector is dominated by institutionally owned adviser practices, with AMP and the big banks among the largest players.
Some smaller practices have sought increased scale through joining groups such as the Association of Independently Owned Financial Planners, which aims to negotiate better deals from financial product and service providers.
Mr Joyner said the group of 12, which started out as a trial cooperative two years ago, represented some of the nation's best non-institutional practices.
"There aren't many good independents, in inverted commas, that are left," Mr Joyner said.
Perth-based Sam Gannon (of Gannon Growden Schonell), Philip Guest (Guest McLeod) and Ian Heraud (Heraud Harrison) were among the main drivers of the cooperative. Mr Gannon was appointed chairman of the merged group.
Mr Gannon said the merging of administrative duties would allow advisers to have more client-facing time.
The rebranding is part of the group's ambition to rationalise the participating groups to end up with one strong business rather than 12 underlying firms. Shadforth is thought to represent about $10 billion in client money - although market movements can inflate or deflate that figure rapidly - with about $1 billion of that sourced from Western Australia.
Chief executive Tony Fenning said a long-talked-about plan to list Shadforth would be viable when conditions improved.
"The global financial crisis got in the way," Mr Fenning said. "Obviously that hit everybody for a surprising six."
Listed financial planning firms attracted high multiples before the market downturn, with industry heavyweight Count Financial trading at a price to earnings (PE) ratio of more than 30 times.
The niche group of listed companies, which includes Perth-based Plan B Group Holdings, still trades above the market's average PE ratio.
A listing would more easily allow the Shadforth principals to sell down their interest in the business as they approach retirement.
In company documents, Shadforth said it was committed to fee-for-service, rather than the controversial product commission structure the broader industry has long thrived on.
But the group does receive rebates from its relationship with platform provider BT Financial Group. Platform rebates reward adviser groups that place large amounts of client money through a particular investment platform. Critics claim this creates the potential for bad advice by influencing the flow of money.
The removal of platform rebates could reduce the cost to the client by up to 40 per cent, according to detractors of platform rebates.
Mr Fenning said Shadforth shared some of the administrative work with BT and therefore income received from the platform was a fee, rather than a bonus.
"Our point is that's a totally justified fee," Mr Fenning said.
"We're pretty relaxed about any [legislative] changes."
Commissions are currently being scrutinised by the federal government, and the industry is preparing for an overhaul of its charging practices.
