The insto brain drain

Talk of momentum within independent and non-aligned advice has been escalating for some time, and in this publication above all others. But the first few months of 2017 have seen a number of senior figures within the wealth management industry put their money where others’ mouths have been.

It has been years since the major institutions (bar IOOF) have made an acquisition of a dealer group, and the number of advisers seeking their own licence or forming new licensees has been on an upward trajectory. These individual actions have been further bolstered by the consistent finding in the InvestorDaily Dealer Group of Choice survey over a number of years that a majority of advisers would choose an independent or non-aligned dealer were they to opt for a switch.

The dramatic reduction in adviser numbers at AMP last year provides further evidence that the migration is well underway, in case any was needed.

But now this trend has moved further up the food chain, with not only advisers and practice principals moving to the non-aligned environment but also a number of senior managers and industry executives.

Arguably the most high-profile of these market moves was the news that Annick Donat, formerly head of licensee development for BT Financial Group, was recruited to the top job at Madison Financial Group. Ms Donat, a long-time contributor to ifa, was one of the best minds within the Westpac network (and the country) when it comes to practice management and her defection is a boon for Madison and its advisers.

Fortnum has also been the recipient of some fleeing Westpac talent, with former BT Financial Group national manager, practice advice, Kerry Thomas joining the non-aligned group as head of advice, as has Infocus, who has picked up BT’s former acting general manager for Victoria and Tasmania Michael Corcoran to run its salaried advice channel.

As part of its recruitment drive, Infocus has also fired former Heritage Bank executive Richard Herbst, who ran the bank’s wealth management arm before it was sold to IOOF.

Meanwhile, growing dealer group Evermore recruited Chris Chetham, AMP’s former practice development manager in Queensland, amid a number of similar moves of late.

Now, of course, it would be hasty to jump to conclusions and these decisions could just be isolated coincidences. But given the backdrop of declining numbers and shifting deck chairs at the institutional dealers, it is far more likely that we are instead seeing a meaningful human resources trend reflective of some broader truths.

For while the official spokespeople at the institutions have either stayed mum or offered public denial of the trend towards non-bank channels – such as the “nothing to see here” act offered by AMP CEO Craig Meller in the wake of news that every single one of the advice giant’s licensees has seen a recent decline in numbers – the managers and executives within these diminishing channels have clearly been paying close attention.

With their level of education, industry knowledge and (presumably) ample compensation, the decisions these individuals have taken to leave the seeming security and attractiveness of working for a major bank or institution in exchange for the risk associated with smaller albeit growing groups is significant.

These are rational and intelligent actors who have already achieved considerable success in their careers and were nicely working their way up the corporate ladders. To that end, it is pretty unlikely they joined non-aligned groups because they simply woke up one morning and developed deep philosophical problems with their current employers and a desire to jump on the independent advice bandwagon for the purposes of identity politics.

Instead, it is more likely that they have each made a sober assessment that the outlook for institutionally-owned advice is somewhat less rosy than the investor relations documents would have you believe, and that the momentum towards independent advice is more than just rhetoric emanating from this website.

Whether or not experience as a manager within institutionally-owned businesses is the right formula for success in the independent space – particularly given the freedom-loving nature of most authorised reps of non-aligned AFSLs – remains to be seen.

But what is clear is that a brain drain of licensee management expertise is currently dripping away from Australia’s financial institutions. Their loss is the IFA movement’s gain.

Aleks Vickovich is managing editor of ifa