As we place our cue in the rack (for the time being) on the issue of adviser remuneration, we now turn our attention to the impact of the Global Financial Crisis (GFC) on boutique advice practices.
Some industry commentators are suggesting that one of the outcomes of the GFC will be a consolidation of the number of financial advice businesses in Australia. The reasoning behind this point of view is that in times of economic uncertainty, consumers (and advisers) will seek safety and security in larger, more ‘visible’ financial planning groups.
In a recent article from eFinancialCareers‘ Simon Mortlock, the argument suggests that while the stock market was operating at record levels, financial planning revenues were also high, and few practice principals were considering the sale of their business.
But with revenues sliding, in a lot of cases substantially, anecdotal reports suggest that many smaller, boutique advice firms are either looking to merge with other practices or transfer/sell their business into one of the larger financial planning groups that best reflect the culture of their business.
But does having fewer boutique advice firms mean less choice and flexibility for the consumer? Or will the consumer continue to receive exactly the same level of service and insurance and investment advice from the same adviser who has now moved into a larger or top 30 dealer group? The answer to these questions may vary depending on the individual circumstances of the adviser and client and the policies of the dealer group.
But for the purpose of this poll, we want to know whether or not you agree that the GFC will ultimately result in a consolidation of the number of financial advice practices in Australia, particularly as many advisers reading this poll article will have a strong opinion based on their own present circumstances.
As well as casting your vote in the poll you are welcome to add your own opinion below in our Comments section.
Of course boutique FP practices will survive the GFC. Some will merge with larger practices and others will disappear all together but at the same time new smaller practices will be formed. Financial Planning is a relationship based industry and history has shown us that clients prefer to deal with smaller practices (even if they are part of a larger group). This is why there are no mega practices such as occur in the Accounting or Legal professions. Financial Services is an incredibly resilient industry it has survived major changes in the past and it will survive major change now and in the future.
Cost efficiencies are usually the primary driving force in consolidation within service industries. As an industries matures and margins fall the need to consolidate becomes more compelling. While asset prices rose ti was easy to coneal inefficiencies under growing revenue. However I fear that leaner times will compel many to seek consolidation or perish. This is equally applicable to Accounting practices where small practices tend to be less efficient. It is clear that excessive consolidation provides new opportunities for boutique players. Again this is apparent in Accounting practices that are absorbed into bigger group and then leak clients preferring a more personalised service. But this process is ongoing and those boutiques that sprout from the colsolidation of others need a value proposition that is compelling to clients. This may be a relationship based value proposition or via technological innovation. Either way not all will survive in their current guise.
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