Financial advice ‘land grab’ to cost consumers
A BUY-UP of independent financial advisers by big fund managers could mean reduced choice for consumers, critics say.
The issue has been highlighted by a couple of recent acquisitions of smaller independent firms by large industry players.
AMP-owned AdviceFirst has purchased adviser group Goldridge, which has more than $200 million under management, while Fisher Funds is looking to acquire the assets of Auckland- based advisory firm Diversified.
The move by AdviceFirst comes after AMP recently handed it the management of its Roost Mortgage Brokers business.
AdviceFirst chief executive Mark Ennis said the Goldridge acquisition was part of a strategy to beef up its wealth management business in order to offer a more complete advice package to clients.
‘‘We’ve been stronger in life insurance and looking forward we wanted to have a more holistic offering that includes wealth management and mortgages.’’
Ennis said the company would continue to look for buying opportunities, not just bigger businesses like Goldridge but sole practitioner advisers as well.
‘‘We’re still on the lookout for acquisitions, as long as they make sense.’’
But Diversified director Norman Stacey said investors could be worse off if big financial firms became too dominant at the expense of smaller, independent advisers.
‘‘I think there’ll be less choice and more commonality in investment styles.’’
Stacey said times were tough for small financial advisers who weren’t aligned with one of the big fund managers, banks or insurers.
‘‘Independent financial advisers are really struggling with the additional costs of regulation,’’ he said.
‘‘Regulation has a tendency to deliver business to the big end of town.’’
Pathfinder Asset Management’s John Berry, a co-founder of the boutique fund manager forum, was also concerned at the plight of independent financial advisers in New Zealand.
‘‘From my perspective independent advisers are absolutely critical to ensuring investors get good advice in New Zealand. They keep the big guys honest,’’ he said.
‘‘Independent guys will look at a wide range of products in the market, including boutiques. For local boutiques they’ve been an important way of distributing products to the market when often the doors are closed to the large players.’’
Berry said companies that both produced financial products and provided financial advice needed to make sure they acted in the best interests of their clients.
‘‘They should be looking outside their own product range when considering the best product for their clients.’’
But not everyone believes independent advisers will go the way of the dinosaur.
Australian finance author Clayton Coplestone said the industry here would likely see a ‘‘land grab’’ like in Australia in the late 1990s and early 2000s, when banks snapped up adviser groups for ‘‘extraordinary’’ prices.
However, he predicted independent advisers would make a comeback as KiwiSaver balances grow and more people seek unbiased advice.
‘‘What consumers are looking for is a trusted relationship with a financial adviser. They want one person they can go to with their financial woes,’’ he said.
‘‘Banks have done a brilliant job of keeping consumers out of the branch with ATMs and the internet. But because they don’t have relationships with their clients, I think the banks in particular are going to struggle to retain some of the large KiwiSaver balances.’’