Institutional financial planning business model is dead – what about the future?

Paul Tynan

Paul Tynan

History will judge institutional ownership of financial planning in Australia as a venture that failed to live up to expectations says Connect Financial Service Brokers (Connect) CEO Paul Tynan as a number of the industry’s largest players head for the exit and begin to shut down their advice arms.

Some of these Australian institutions are already well advanced in terminating their financial planning businesses. November last year Suncorp announced the closure of its risk advice focussed Guardian Advice and Suncorp Financial Planning ventures. As a result, 170 planners needed to transition their practices to new dealer groups to continue their advice businesses.

ANZ is minimizing its Asian activities and all their Australian retail financial services are under review.

Commenting further Paul Tynan said it’s not hard to see the reasons for the failure. “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”.

“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”.

Paul Tynan continued, “In simple terms, modern financial planning models must be flexible, fast and ‘ahead of the curve’ 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.

“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cheap – especially for the institutions that have accumulated an overwhelming array of legacy products and associated outdated platforms as they acquired the businesses of their competitors”.

Australian financial service businesses responded by seeking to introduce a standard service model that fits all clients; but they lagged behind rapid advances in technology whereby consumers can access information and execute transactions on many different platforms and this trend will only accelerate in the future.

“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”, said Paul Tynan.

“Some planners may be surprised when they read their agency agreements to see who really owns the rights to the client or the revenue”.

The answer to this question will determine if the planner has an asset to sell or transition if their institution decides to sell off the financial service business.

The death march of the licensed institutional financial planning firm is well underway and the chapter in history about to end.

But far from being doom and gloom Paul Tynan is excited about the prospects and growth potential for the sector as it is a once in a lifetime opportunity to build industry and service models from the ground up with the client firmly in the centre.

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