IBISWorld Market Research
The Future of Financial Advice legislation has forced fundamental changes on the industry.
Melbourne, Australia (PRWEB) August 09, 2013
The Financial Planning and Investment Advice industry has recently undergone fundamental change. Future Of Financial Advice (FOFA) legislation has plagued the industry with uncertainty. IBISWorld industry analyst Tim Stephen states: “following a swathe of advisory firm disasters, the government announced an overhaul of the industry, addressing conflicts of interest, transparency and client's best interest.” The industry initially fought the new regulations, but eventually accepted the inevitable. A number of the larger dealer groups made early moves to become compliant with the new regulations, implementing a fee-for-service based remuneration model. The opportunistic early-adopters have given themselves more time to acclimatise and perfect remuneration and pricing structures.
Advisory and planning groups enter this new era having barely recovered from the global financial crisis. Asset values have dropped, consumers have remained cautious and income growth has been slow. Industry revenue is estimated to grow at a compound annual rate of 2.5% in the five years through 2013-14, when revenue will measure an estimated $4.4 billion. In the current year, the industry is expected to struggle as it adapts to a new regulatory environment and encounters low consumer confidence. Uncertainty will lead to lay-offs and career changes, offset by the recruitment and training of a new generation of advisors. Revenue is forecast to grow just 2.4% in 2013-14. Over the next two years, the structure of the industry will shift significantly. FOFA legislation was implemented in July 2013 and its long-term effects remain unclear. According to Stephen, “demographic trends, superannuation legislation, a rebounding economy and the complexity of the financial environment will support growing demand for financial advice.” Additionally, greater transparency, professionalism and client confidence as a result of regulatory changes will benefit industry players.
The Financial Planning and Investment Advice industry has a low level of concentration. However, the industry is bordering on a moderate level of concentration. The industry will soon fall into the moderate band as consolidation continues. Concentration within the industry has been increasing mainly through the process of acquisitions and mergers. Industry consolidation is being driven largely by the economies of scale achieved by having larger numbers of financial planners within the same dealer group. Larger financial institutions increase the distribution of their financial products through larger dealer groups and cross-sell financial products. Additionally, with FOFA reforms now in place, many smaller firms have found the new regulations difficult to adapt to, and have proven easy targets for their larger counterparts. The industry’s major players are AMP Limited, the Commonwealth Bank, ANZ Bank, Westpac and the National Australia Bank. For more information, visit IBISWorld’s Financial Planning and Investment Advice report in Australia industry page.
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