Institutional owners of financial advice will continue to struggle to deliver, an industry consultant has claimed, due to an inability to move beyond their traditional, product aligned models.
Connect Financial Service Brokers, Chief Executive, Paul Tynan said he believed institutional ownership of financial planning had failed to live up to expectations and was coming to an end as a number of firms have either exited, or were making plans to exit the advice market.
Tynan said this exit was being driven by consumer demand, changing technology and new business models which institutional owners of advisory businesses could not keep up with.
“In simple terms, modern financial planning models must be flexible, fast and ‘ahead of the curve’ in order to anticipate and satisfy the growing diversity and complexity of client needs. Large institutions just don’t have the capacity to respond quickly and lack resources to support every project and priority within its structure,” Tynan said.
“… modern financial planning models must be flexible, fast and ‘ahead of the curve’…”
“It simply comes down to the institutions believing that a single standalone perfect business model was achievable and the utopian structure could successfully address the complexities of delivering advice in the modern era”.
He said the inability to respond rapidly to change, as well as the entrenching of incumbent business models, was compounded by management within the institutions looking to develop systems and processes while they lacked any experience of providing advice.
While Tynan says the decline of institutional owners of advisory businesses will provide opportunities for new advice models advisers working under institutions will need to be clear as to what this may mean for them.
“Institutions have always seen financial planning as distribution for their proprietary products or as a way to maintain clients in these channels. What institutions will do with these planning businesses and their future strategy will depend on who owns the client”, Tynan said.
“Some planners may be surprised when they read their agency agreements to see who really owns the rights to the client or the revenue”.
