Institutional ownership of financial advice businesses is a failing model, as many banks do not have the capacity to respond quickly to industry disruption, a consultant has said.
Connect Financial Service Brokers chief executive Paul Tynan said in a statement he expects more large players to exit the financial advice space.
“It simply comes down to the institutions believing that a single, standalone, perfect business model was achievable and the utopian structure could successfully address the complexities of delivering advice in the modern era,” he said.
“The situation was compounded further with management and their battery of consultants striving to develop strategies and infrastructures without the benefit of ‘hands-on’ advice experience and lacking this intimate understanding and appreciation – their efforts were doomed to fail.”
Mr Tynan added that modern financial advice firms must be flexible and fast in order to anticipate and satisfy the growing diversity and complexity of client needs.
“Large institutions just don’t have the capacity to respond quickly and lack resources to support every project and priority within its structure,” he said.
“Technology has been the game changer and tool that helps to build much-needed flexibility required to create a virtual servicing model. But it’s not cheap, especially for the institutions that have accumulated an overwhelming array of legacy products and associated outdated platforms as they acquired the businesses of their competitors.
“Institutions have always seen financial planning as distribution for their proprietary products or as a way to maintain clients in these channels. What institutions will do with these planning businesses and their future strategy will depend on who owns the client.”