The most salient part of it, I think, is this personal insight of yours:
"A greater issue for FID and IFL, in which I'm also invested, is getting hold of competent, qualified advisors now that the new regulations require advisors to actually know what they're talking about."
That describes a major transformation in the structure of the industry; in economic parlance: a supply side shock, which moves the supply curve to the left.
And when the supply curve moves to the left without any change in the demand function, then the equilibrium price of the service rises.
Accordingly, I expect to see two things over the foreseeable future:
1.) The nature of financial advice increasingly moving up the value curve, i.e.. less generic, and more "premium-ised", advice as limited advice capacity seeks to garner greater returns (with the attendant improvement in industry economics and profitability), and
2.) M&A activity - if you are running a wealth management enterprise, and you have a mandate to grow the profits of that enterprise, given there aren't enough good financial advisors available to be hired, you will have to buy out other enterprises that do have advisors on their books.
The events of the past decade, which caused significant reputational contamination of the financial advice industry in Australia, have left the listed stocks in this sector trading at steep valuation multiple discounts to the broader market.
Once in becomes evident that the contaminants have been expunged from the industry, those valuation multiple discounts can reasonably be expected to narrow sharply.
The combination of improved industry economics & profitability, and higher valuation multiples, signify strong future investment returns from this sector.
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FID Price at posting:
$6.81 Sentiment: None Disclosure: Held
(20min delay)
