Advisers risk being left behind

Many financial planners are running the risk of being left behind by the shifting landscape of industry trends, Northplan director Kelvin Syms says.

Thursday, March 9th 2006, 6:44AM

He believes that financial planners cannot go on the way that they always have and change is required.

“Research conducted by JPMorgan Asset Management in the United States recently found a number of challenging trends which echo what is happening in New Zealand – and it’s a future financial planners should be thinking about.

“Here in New Zealand – as in the US – the financial planner population is ageing; competition in the small to medium advisory sector is growing by the day; impending regulation is raising costs and risk – and not to forget increasing operating costs and salaries, particularly in a tight New Zealand labour market.

The JPMorgan study predicts that by 2012 the top of the US advisory industry will consolidate into 25 to 50 large firms with at least US$15 billion of assets under management and US$50 million of revenue.

Syms says the study found the majority of the industry would be: “caught in limbo’ — large enough to stay in business but unprofitable (after paying their owners a market-level salary) and lacking the resources to grow. Their owners will work harder, earn less and get little or no consideration when they sell their businesses.

Syms says small and mid-sized planning groups need to look at joining up with or aligning with larger groups, like Northplan, to secure their business future.

“The likelihood of advisers being able to get retail value for their businesses when they want to retire is low,” he says.

Northplan working shareholder and director Simon Purvis says the company is actively looking for opportunities with financial planners.

“I think we can offer many financial advisors an opportunity to break through that income ceiling that limits many smaller businesses, and people employed by corporates such as banks, while also offering them a secure income. We provide our advisers with the infrastructure and systems to concentrate on client service.”

He says that by being part of a larger group the financial planner can leave the information, compliance and licensing costs and risks to the company.

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