Appearing on the ‘Trailblazers’ panel at the 14th annual Wraps, Platforms & Masterfunds conference in the Hunter Valley on 12 September, Mr Heine was asked about the likelihood of the big banks divesting their wealth divisions.
The brand of the big banks is getting “smashed in the press”, he said, referring to revelations of poor financial advice at CBA dealer groups Commonwealth Financial Planning and Financial Wisdom.
On the distribution side, Netwealth is receiving inquiries from people looking to set up their own AFSL every day, Mr Heine said.
ifa reported in July that industry consultants are seeing a dramatic uptick in the number of new AFSL applications in the wake of the CBA scandal.
Putting the state of the advice market in context, Mr Heine said the IFA market has been hovering at around 20 per cent of the industry for the last 20 years – with the institutional/IFA ratio at 90/10 at one stage.
“I think it could shift very quickly back the other way – it might be 50/50 in the next couple of years,” Mr Heine said.
“A large part of that is because of brand. [The big banks’] brand is getting smashed in the press and [bank-aligned planners] don’t want to be associated with them anymore,” Mr Heine said.
“[The banks have] really got to focus on those two advantages [brand and distribution] which may or may not give them an advantage in the future,” he said.
But WealthTrac chief executive Matt Johnson, who joined Mr Heine on the ‘Trailblazers’ panel, was less optimistic about the likelihood of the big banks divesting their wealth arms.
“I can’t see that ever happening because [the banks] are also loving their term deposits which will back up their balance sheets,” Mr Johnson said.
“There’s no way in the foreseeable future that they’ll divest out of product. They might start to taper down on advice … but bring it on, I say.
“It’s a nice pond that [WealthTrac is] in and I think there are enough good quality players in there. But let them have a crack – I’ll welcome the opportunity,” Mr Johnson said.
James Smith, the survey wasn’t bank v bank. It was dealer group v dealer group. What did you mean by “They measure the value of the service by what they receive.” What else are they going to measure it against? Some advisers theoretical comments on a blog about how advice should be delivered? I think I can safely put you in the “holyier than thow” bucket.
SA I understand that this satisfaction ranking is relative to the other banks which doesn’t mean much. In fact the banking oligopoly is part of the problem as inadequate competitions does nothing for raising service standards ie so long as we are not as bad as the other guys we are OK. Financial planning is a client centric personal service which is very difficult to deliver in a bureaucratic business model.Sadly, the poor attempts by banks to deliver this service are unfairly tarnishing the whole industry and prompting knee jerk reactions from the regulators. Of course existing clients don’t care about this debate. They measure the value of the service by what they receive. However, neither they nor the advisers that deliver them this service have a voice.
The bigger is better model led to banks wanting in on the action but should fade as it doesn’t work. The ideal size of an AFSL adviser group might be between 5 and 25 advisers spread over a couple of regions/states, with some economy of scale but sufficient ability for oversight and compliance to be effective. Single AFSL/practitioners (I’m one) will also need to find economies of scale by forming groups for purchasing tech and legal/compliance work and referral to legal and estate planning services for their clients’ needs.
Matt and Michael Heine are a couple of years ahead of the pack, and they developed the best platform product (netwealth)in the market, but even they have fallen for the lure of vertical integration, attempting to be both adviser/dealer and product manufacturer… Perhaps they’ll avoid the traps by their model standing on best practices rather than being sales driven?
Didn’t the CBA Advice arm recently get the highest satisfaction rating from it’s customers? I think we overestimate the damage these scandals have on brand. We in the industry love drumming it up and taking pot shots at each other. At the end of the day banks have a massive cross sell opportunity and they will make it work if they want to. Don’t think that every advice client reads these industry rags and takes the same moral high ground and holyier than though attitude that many IFA’s on this website take. Not every advice client wants to pay a large sum for holistic advice. Banks are catering for all advice segments (light and holistic). You may judge that advice to be inferior to your own because of the business model they operate in but most mum and dads don’t know what you are talking about and really don’t care.
The banks and instos have tried to bypass advice practises and do it themselves and have ended up with egg on their face by underestimating what it takes to meet the needs of clients. Their future will depend on how effectively they can reengage advice practises. They are in vulnerable times as they are increasingly being run by bankers or career executives with no experience in understanding the financial planning needs of clients.Advisers and clients are increasingly cynical of their business model which puts profits above clients/advice practises which is a doomed model.Quality advice practises are in the box seat to define the support they need.