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Advice industry changing shape

The landscape of the financial advice industry is expected to change in 2014 but there is debate over whether this movement will favour the big players.

Wednesday, January 22nd 2014, 6:00AM

by Niko Kloeten

Consultant Mike Moore, who works with advisers buying and selling their businesses, says the improved economic conditions could lead to more financial advisers setting up their own businesses.

Moore also expects to see some mergers among aggregators, because he says the business model doesn’t produce benefits for owners.

But advisers have mixed views on whether to expect more SMEs in the financial advice industry.

New Zealand Financial Planning principal Jordi Garcia predicts there will be “juggling” within the industry, but he’s not sure many advisers start up their own businesses in the current environment.

“There’s still a predominant air of caution.  I just struggle to see financial markets as being in a bubble because I still think there’s one eye firmly on the rear view mirror and the GFC.”

However, Garcia says there is a good opportunity for advisers who are currently tied to one of the big institutions to become more independent.

“If you go to a financial adviser now, the chances are pretty good that you’ll get a bank adviser or an AMP adviser.  There are not many independent advisers you can go and have a chat to.”

Financial focus adviser Murray Weatherston says the market is likely to move the other way.

“I would have thought the whole regulatory environment is pushing lots of previously standalone advisers to form an alliance with someone bigger.  That seems to be a regular tidal flow.

“It would seem to me to be perverse if at the same time there were people wanting to jump out of those situations into standalone businesses.”

Weatherston says another issue affecting small adviser businesses is the incoming licensing regime for DIMS (discretionary investment management services).

“Most advisers, whether they like it or not, will find they are providing class DIMS and will need to get licensed, when I’m sure the belief of many advisers is that they were offering personalised DIMS.”

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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