My view on the future shape of the advisory industry

Thursday, April 20th 2006, 9:13PM

Quite often I am asked for my view on the future of the financial advisory industry in New Zealand. My view, which I am happy to explain to anyone who asks (and it reiterates what I have put on record before), is that the future will be quite different to Australia.

New Zealand will not adopt a model where all advisory businesses have to be part of a network or dealer group.

The task force in its papers made it very clear that it did not to see New Zealand dominated by a dealer group environment.

It went onto say that the structure of the New Zealand market where there are many small advisory firms doing a good job servicing the public is something it didn't want to see disappear.

Yes there are a number of industry players suggesting the end of the small firm is nigh. A number of firms that make these comments are related.

While the following comments may not win any friends in those quarters it has to be said.

My key point is that bullying advisors to join networks is poor form. I know there are advisory firms that have cooled relationships towards firms that take a heavy-handed approach to the impending changes.

To say get in to a network now or you will enjoy "lower status" if you come in later is tantamount to threats.

To say that selling now will get an adviser a better price for their business than later when there is a glut of advisory firms for sale and supply will exceed demand has little basis of fact. The price of a business is not determined by supply and demand alone.

This topic has come up before. I recall former FPIA chief executive Phillip Matthews publicly disagreeing with a bank that thought regulation was good as it would make advisers join networks.

It is the media's role to report what others are saying. We, and others, report what senior industry figures say. To describe reporting as media commentary is misleading and disingenuous.

I am not saying networks don't work or they are bad. For many firms they are a good outcome and there is a place for them. But there is also a strong place for the small one or two-man advisory businesses.

The media can get criticised for reporting one side of the story. But that camp has successfully endeavored to tell its story while the opposing camp have been quiet.

As usual I leave you with my invitation....if you would like to comment on this Blog send an email to blog@goodreturns.co.nz

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