November 6, 2017
Vertically integrated advice groups are losing around 10 per cent of their financial advisers each year with thousands set to move away from that advice channel in the next three years, according to a new consultancy firm.
The new business – GreenZone Australia, created by Fortnum Financial Director, Ray Miles and former Equity Trustees executive, Geoff Rimmer – has released a whitepaper examining the shifts in adviser and consumer sentiment around vertically integrated advice.
The paper stated that recent market reviews have found that 400 advisers left vertically integrated advice businesses owned by the four major banks and AMP in the first half of the current financial year.
“If this trend continues, ignoring the estimated 2,000 salaried advisers employed by the banks, the emerging trend away from the vertically integrated model is already well over 10 per cent annually,” the paper stated, adding that ongoing industry changes would lead to further departures.
“The number of advisers choosing to exit the industry rather than step up to meet the pending qualification standards required by 2019 will exacerbate this,” it added, stating “…this approximates to more than 3,000 advisers leaving the vertically integrated system by 2020”.
“..this approximates to more than 3,000 advisers leaving the vertically integrated system by 2020”
According to the whitepaper, the level of negative press surrounding vertically integrated advice businesses is driving institutions to distance themselves from that model, which GreenZone regarded as coming to the end of its life.
As a result of this, the paper contended that many advice businesses will need to adapt to new business models and this was taking place as advisers left institutional licensees.
While not addressing the issue of life insurance specifically, the paper claimed new advice models were adopting a ‘conﬂict free’ approach in which they had no other forms of revenue other than explicit fees paid by clients for different forms of advice.
“A number of firms are now moving towards this model, are already at this model, or have commenced the journey to do so…It is gathering momentum and we believe it is the tipping point for the industry,” the paper stated.