Mortgages and financial advice seemed to be the perfect match on paper, but the economic reality has proved to be very different.
Long before the royal commission, a handful of mortgage broking groups saw an opportunity in financial advice. Loan Market, Mortgage Choice and Yellow Brick Road (YBR) all offered, until recently, mortgage broking and wealth management services.
But running an AFSL has proved to be too difficult. Last year, Mortgage Choice made a business decision to exit financial planning as part of a program of work to focus and streamline the business ahead of its acquisition by REA Group.
Mortgage Choice Financial Planning has not had any financial advisers on its licence since March 2022.
Loan Market, the mortgage broking arm of real estate giant, Ray White, wound up the Wealth Market business in March. Chairman Sam White said he believes in financial advice for all Australians — “not just the wealthy”. Yet like Mortgage Choice, the group couldn’t see a viable business case for keeping Wealth Market going.
YBR got out of financial advice before Loan Market and Mortgage Choice. The group sold its advice business in early 2020.
YBR’s executive chairman, Mark Bouris, told ifa that in financial advice businesses, there are more people and cost in compliance than there is in marketing. He said he’s not surprised that mortgage groups have joined the banks in exiting advice. He expects to see more AFSLs exit the sector.
“There’s just not enough money in it for them,” he said. “It’s what I call profitless prosperity. It’s not only not viable, it’s a liability. Financial advice is a high-risk, low-return business.”
Mortgage Choice, Wealth Market and YBR all believe in financial advice. They see value in it. It just doesn’t make enough money.
Yes, and the risks keep getting higher while profits keep falling. Advice is a discretionary service – people don’t want it if parliament continues to make it more unaffordable.
Happened ever since lif and fofa let alone the compliance torture post 2018 which aligns with their exits.
yet there are 16,000 financial advisers that are “contrarians” who continue to believe otherwise.
The high net worth advisers are doing very well. It’s the mum-and-dad advice industry that died a death.
Umm – In a word – YES.
Why would you give financial advice (with all its headaches, compluiance, education requirements, annual opt in, etc) when you can get paid a 30 year commission for comparing a few different mortgage rates on your calculator without the need to have any compliance after completing a 2 day training course
The almost 50% of advisers who exited the industry I. The last 4 years seem to agree…
Of course it has! When I joined the industry, there were limited barriers to entry, and strong, ethical businesses were servicing large client bases, with fair profitability. Since FOFA recommendations in 2013, which had the right intention but wrong outcomes, the industry has slowly morphed from service and customer driven, to compliance and regulatory driven. Any business which does a 180 on customer service and customer outcomes, is doomed to failure. This is not rocket science people. Remove the over regulation, dictated by people who have never drafted a financial plan, paid for advice, nor assisted a treasured client at their weakest moment, and let the adults get on with restoring faith in a once admired and widely accessible industry. Merry Christmas to all.
IMO, it is more that these businesses went into financial planning for the wrong reason. They saw it as an easy way to sell other products and make money from these sales. It’s not. The future is bright for planners that focus more on strategy than selling products, but it’s going to be a hard slog for those wanting to just sell products.
Becoming a profession might be the only golden Carrot required for you – lots of compliance to reduce the numbers of clients you are able to provide advice to in any one year, education requirements to ensure numbers don’t grow, and leave the product distribution to the established dominant market players – that is IMO the real money – and Financial Planners switching products and providing distribution channels for competitors to the established dominant player IMO is why you, as a Professional need education, training, FASEA, Opt-in, BID, etc and why product providers will likely need non of that to provide personal advice – but I could be wrong and you could be right.