The shifting advice landscape has seen a change of behaviour in product distribution channels, according to research from Adviser Ratings.
Private market and self-licensed boutiques have emerged as the top target for product manufacturer distributions teams, ending the trend of prioritising the larger, privately-owned licensee segment.
The ‘Australian Financial Advice Landscape’ report was released earlier this year which found almost 70 per cent of distribution heads surveyed see the retail sector having an increased importance and constituting a major part of their revenue.
Distribution heads now list the adviser relationship as the second most important factor in their success – behind the strength and characteristics of the product itself.
Apart from software providers and data companies, the relationship with licensees is deemed less important for distribution heads.
Licensees that have experienced significant adviser losses, such as AMP and Insignia Financial, have seen a lower distribution focus, and shrinking segments like accountants with limited AFSLs and the big banks are also receiving less attention from distribution heads.
“It wasn’t long ago that boutiques made up a very small piece of the retail pie, while banks owned a lot of the value chain,” analysis from Adviser Ratings said.
“We’ve seen that shift quite quickly. A few years later, its little surprise self-licensed boutiques are capturing attention.”
Adapting to the new environment
Adviser Ratings founder Angus Woods tells Professional Planner that distributions teams have been restructured in light of market fragmentation.
“Everyone’s at a loss to understand where everybody has ended up from a self-licensed perspective,” Woods says.
“They’ve now realised over time that the licensees don’t wield as much influence as they probably anticipated than in the past.”
Woods says previously it came down to a top-down licensee-to-adviser hierarchy for research and approved product lists.
“It’s now a bottom-up approach where a lot of the decisions are left in the hands of advisers when it comes to this,” he says.
“Licensees rely more on the researchers and the investment consultations and the relationship they have over the adviser, as opposed to the licensees having an overarching relationship [with advisers].”
Two-way street
However, advisers still do rely on relationships with BDMs because of the proliferation of new products in the market, Woods says.
“They’ve been choosy about which products they partner with,” he says.
“The challenge for the distributors is about understanding what the adviser wants. Distribution teams are being far more specialised in how they approach advisers. They’re far more bespoke.”
Smaller BDM teams are making significant inroads, as opposed to a marketing approach at a high level.
“Don’t get me wrong, there’s a lot of flows into the Vanguards and BlackRocks, but there’s more agile distribution teams because there’s a lot more products on the market and a lot more choice,” Woods says.
“It’s a cutthroat relationship driven world now because of the choice that advisers have.”
Woods says researchers still play a significant role with that capability falling under the purview of investment consultants rather than at the licensee level.
“A lot of more of the investment consultants having more sway in those relationships,” he says.
“The normal landscape used to be licensee and product. Now it’s licensee to a certain extent, but it’s adviser in the room, it’s often two or three investment consultants to make a decision as to whether that’s a product you want to start issuing.”
