While the licensee market hardens amid tightening revenue streams and the ongoing adviser exodus, a bunch of licensee groups in rural and country areas are growing along with economic growth kick-started by an end to the drought.
But much-needed rainfall is only half the story, as rural advice hubs have also been able to capitalise on the banks’ collective retreat from advice, the reluctance of accountants to wade into advice and a pandemic-related drift away from the coast.
Like most things outside the Sydney basin, however, it all starts with the fate of farmers.
According to Lindsay Garnock, director and senior financial adviser at Boyce Financial Services, the turnaround in recent years has been stark.
“Over the last few years the rural and regional area has done remarkable well,” Garnock tells Professional Planner. “Land prices are strong, the drought has broken, cotton prices, beef, are all doing really well.”
Originally a Lonsdale-branded group under IOOF, Boyce became self-licensed last year while still retaining a bespoke version of IOOF’s Alliances service plan. The group takes a one-stop-shop approach, offering accounting, SMSF, and financial advice across offices in Wagga Wagga, Goulburn, Dubbo and Cooma.
Garnock says the group’s funds under management has grown at a “steady ten or eleven per cent” per year.
Improved conditions for farmers are a big part of this. After one of the worst droughts in years rainfall in 2020 “saw improvement across many areas” according to the bureau of meteorology. Only patches of NSW and Victoria are still in drought recovery.
The subsequent economic recovery has meant not only farmers, but the associated businesses and the towns that connect them, have largely recovered.
“We’re not all agriculture but neither is the sector,” Garnock says, “ Most regional clients I speak to are happy. They’re busy and they’re growing.”
Another rural group kicking goals is MBA Wealth Solutions in Bathurst, a small outfit of four advisers that split from a larger accounting group to become self-licensed about four years ago.
The firm’s director, Ron McCumstie, says the economic recovery west of the Blue Mountains has played a large part in the firm’s success.
“A lot of rural clients had a string of four or five really tough years and then a couple of good years,” he recalls. “If the farmers are doing well then the rest of the rural towns do well, that’s what underpins all the businesses in those towns.’
McCumstie identifies several other factors that have contributed to the success of independent advice groups in rural areas, however. One is the Hayne royal commission which, combined with the FASEA education mandate, deterred a lot of accountants from entering the advice market under the limited license provision.
“A lot of the accountants who were looking to venture in financial services as part of a value add decided to drop it because of the royal commission,” he says.
The banks’ subsequent retreat from wealth management and the closure of regional banking branches also played a part.
“That’s been a big help for us,” McCumstie says. “NAB used to have an advice business here, as did CBA.”
Even the pandemic, which brought urban areas to a standstill, has had a silver lining for rural areas.
“Covid been another kick along for us in that there seems to be a wave of people relocating from the coastal areas to the country areas, so we are getting a bump from that.”
The success of these regional, independently licensed advice hubs brings with it only one problem – sourcing enough staff to facilitate growth.
“Getting advisers can be a problem,” Garnock says. “Recruitment is tough.”
Otherwise, the regional advice sector still also suffers a lot of the same issues as city based groups.
“The increased cost to do business since 2018 has been phenomenal,” Garnock continues. “Regulation, PI cover, the adviser levy… I budgeted ten grand for the adviser levy but it’s going to cost me around $25,000.”
Becoming self-licensed also comes with a cost; Garnock estimates the group has spent an extra $100,000 to buy their independence.
It’s money well-spent, he reckons. The good times will come and go in regional and country areas but it’s the nature of its inhabitants to back themselves, he believes.
“You can either run from advice or dig in and look for opportunities,” he says. “As an ownership group we’re not backing away, we’re going to keep growing because demand is increasing while supply is decreasing. Getting self-licensed is a step in that direction.”