Numbers sticky despite equity closures
Madeleine Collins
New faces in charge and the closure of lucrative equity schemes at top dealer groups are failing to influence the number of advisers joining their ranks.
IFA's Dealer Group Survey suggests the largest dealerships that have changed their stance on equity during the year have done little to shift adviser numbers in any meaningful way.
Professional Investment Services (PIS) no longer offers equity to its advisers after deciding to close its volume-based remuneration scheme to fall in line with the FPA's conflict of interest principles.
However, another 86 advisers joined in the six months to June 30, 2007, in yet another stellar period for the group.
Westpac Financial Planning, Axa Australia-owned Charter Financial Planning and National Australia Bank (NAB)-backed MLC Financial Planning and Garvan Financial Planning also no longer offer equity to their advisers, according to the survey data.
The closure of Westpac Financial Planning's buyer of last resort (BOLR) scheme has failed to deter advisers, with the group adding 88 to its ranks.
Charter also closed its BOLR scheme but hired 24 advisers.
The exception was Challenger-owned Genesys Wealth Advisers, which closed its equity and BOLR schemes and bled 12 advisers from the firm.
It is in the process of rebuilding its adviser network after suffering dissension in its ranks after a number of key adviser and member groups quit the dealer over a share row.
The heads of the top five dealerships - PIS, AMP Financial Planning, Count Financial, Commonwealth Financial Planning and Westpac Financial Planning - remained in charge of their businesses in the six months to June 30 and continued to mark their spot at the top of the ladder.
NAB's former planning boss Adrian Hondros handed over the reigns to Geoff Rodgers, with just one adviser joining during the year.
Former Securitor boss Sean West took on St George Bank's insurance portfolio and Neil Younger took up the running of the dealer group, with four advisers hired during the year.
Mike Goodall left ANZ Financial Planning at the end of September 2007 to run his own planning business, but not before adding 45 advisers to the group. A replacement for Goodall is yet to be announced.
Churn costs big bucks
Victoria Young
The typical cost of recruiting a financial adviser can be up to $40,000 without taking into account lost revenue, according to a top talent scout.
Recruitment agencies charge around $8000 to find an inexperienced, PS146-qualified adviser and up to $40,000 for an established financial planner with a solid client base.
Dealer groups must also factor in interview costs - up to $300 an hour - and large sign-on bonuses, Link Recruitment financial service practice leader Sarah Gallagher says.
"I think the really big cost in all of this is if the dealer group doesn't have a financial planner in place, they're losing revenue," Gallagher says.
Gallagher, a former Securitor financial planner and Colonial First State fund manager, says the compliance regime has put a dampener on planner poaching.
"Poaching used to happen all the time; it used to be all through the industry. Now, because of compliance, to uproot from one dealer to the next dealer is really heavy going. I know because I've done it," she says.
The major risks of switching licensees are compliance, and losing revenue and clients.
Advisers typically leave a dealer group to set up their own business or to join a group that suits their niche, Gallagher says.
For the first, a flexible approved product list and low dealer group costs are sought. While for the latter, advisers are prepared to pay higher dealer group costs to join the right group.
To IPO or not to IPO
Stephen Blaxhall
Initial public offering (IPO) activity has flourished in the financial services sector in the past year, with dealer groups among the active participants.
Financial services and real estate listings accounted for more than half the dollar value of new IPOs in the first quarter of the 2008 financial year alone, according to a report from Ernst and Young.
Six IPOs in the financial services and diversified financials sectors accounted for $2 billion or 38 per cent of the value of new listings.
Australia's largest financial planning group, Professional Investment Services, is still on target to list on the Australian Securities Exchange (ASX) around March next year, according to the group's single largest shareholder, insurance group Aviva.
PIS currently has over 500 private shareholders, with Aviva holding around 25 per cent in the Queensland-based group.
According to Aviva general manager of key accounts Stephen Trist, the group currently has no plans to increase its holding following the listing.
"I would say we would not be looking to take a majority shareholding," Trist says.
"The success of PIS has been in its ability to include accountants, financial planners and insurance advisors as shareholders, so it's very much a large cooperative. So for us to take a dominant position in there just wouldn't suit the culture of the group.
"We invested in PIS believing that on listing, based on the price we invested two years ago, it will be a successful investment and we look at them as a longer-term holding for us."
The Dealer Group Survey's 25th ranked dealer group, Australian Financial Services (AFS), has a long-term plan. Group chief executive Peter Daly says two years ago the group's board and shareholders agreed to a five-year IPO plan.
According to Daly, while there is in theory still three years left to go, the group could list well before that.
"I would anticipate that we will go to IPO within that five-year period," he says.
"I want to be able to demonstrate to perspective shareholders that AFS has a stable and growing dividend stream and is not a company that has not structured itself for takeover once the IPO is carried out. We don't want them buying into a house of cards.
"At this particular time a lot of work is already in progress to position us for it, we have consolidated the group and in theory I could push the button tomorrow and proceed."
AFS has gained 17 practices this year and Daly confirms the group will continue to expand through further acquisitions. According to Centric Wealth joint chief executive Michael Pillemer, an IPO is the most sustainable way of growing his group's business.
"It will give us acquisition currency and will also enable us to take on new business initiatives," Pillemar says.
Centric, the 58th ranked dealer group, is set to list before the end of the year.
As with its peers in the funds management industry set for an IPO, Pillemer says this offers the opportunity to provide incentives and currency to existing staff and potentially new staff by putting in place equity participation and share option plans.
"We clearly want to attract and maintain the very best staff in the market and while we have been able to successfully attract advisers, it's an ongoing challenge," he says.
He also recognises listing brings the group greater scrutiny from the market, but in the long run, greater transparency will help the business.
"The increase in transparency will bring with it an increased profile, in terms of building our brand and our reputation," he says.
"Our stated objective is to be the leading independently-owned wealth advisory business in Australia. We want to have the premium brand."
According to HLB Mann Judd national chairman John Biddle, many private companies looking at an IPO are initially unaware of the extra scrutiny listing brings.
"You can't have secrets anymore if the business isn't going well," Biddle says.
"Companies in the financial services sector should be better at recognising this than most, but companies considering listing should still think long and hard about the implications."
