Forty per cent of financial planners will exit the industry over the next few years as many realise they’re either too old or too set in their ways to change, according to chief executive of Perpetual Geoff Lloyd.
He added that “part-time advisers”, such as accountants who dabbled in advice on the side and ageing advisers who kept a small client base, would quickly learn that the higher professional standards being imposed on the industry required a full-time commitment.
“A lot of great advisers are doing what has worked for a very long time and they’ve built businesses around a specific set of market conditions and rules, but now they’ve been forced to change their business models and change how they give advice. For those nearing retirement age or who have been delaying retirement, there isn’t enough time to change,” he said.
Lloyd’s comments came as Perpetual reported a 128-per-cent increase in statutory net profit after tax to $61 million for the full year to June 20, 2013. Underlying profit after tax was $75.9 million, up 16 per cent on the previous year. The board announced it would pay a final fully franked dividend of 80 cents per share, bringing the total dividend for the year to $1.30, up 40 per cent of the previous year.
Improved economic conditions and strong investment performance saw Perpetual Investments record a 21-per-cent boost in profit to $87.2 million for the full year. Funds under management grew by 12 per cent to $25.3 billion, despite net outflows of $1.8 billion.
Perpetual Private recorded an 11 per cent increase in profit to $9.2 million, driven by a significant reduction in headcount and further cost-out drives.
Lloyd attributed the result to stronger equity markets and cost discipline under the group’s Transformation 2015 program. He said Perpetual Private would continue to pursue a dual strategy of organic growth and growth through acquisition, and remained determined to become Australia’s leading adviser to high net-worth clients.
Disarming platform
The division, which laid off 80 staff last financial year and culled a further 50 people who serviced Perpetual Private, also implemented a new client platform and restructured its advice model to take into account the source of clients’ money not just the size of their asset pool.
“A business owner with $10 million in assets has very different needs to a retiree with $10 million, and our model has changed to line up with the unique needs of different types of people, such as business owners, professionals and the established wealthy,” Lloyd said.
He said the delivery of the new platform, which was developed with Macquarie Group and required an injection of $5.3 million in the last 12 months, placed Perpetual Private in a strong position to attract new clients and increase its salaried-adviser network, which currently employs 75 advisers.
He said acquisitions were still a part of Perpetual’s growth strategy. “We have been disciplined in our approach towards (buying) financial planning and accounting firms. We have the capacity, balance sheet and appetite for acquisitions, but only if they make sense,” he said.
Lloyd said Perpetual was focused on its core activities of investment management, advice and trustee services but didn’t want to participate in the “arms race” that was administration platforms.
“Platforms require a big balance sheet because there’s significant upfront and ongoing investment to develop and maintain the technology, and that’s before you even get to sales, distribution and marketing. In a constrained-growth environment, people will focus on what they do well and then who they can partner with for the rest.”
“We are not in that arms race anymore because we have a partner in Macquarie,” he said.
