Just how many Brokerages are there in Ireland? | Trends, markets shifting and growth potential

The above subject came up at a recent TAG membership webinar where this was asked. The answer will depend on who you are talking to. Intermediary numbers on the Central Bank register are an estimated 1,600 currently and shrinking as of 2020.

There were 3,700 in 2010 alone, this was a drastic reduction despite a recovering economy by 2013 which was based on a number of factors.

A rule of thumb I used when in PIBA analysing numbers was circa 80-100 Brokerage entrants a year with circa 40 falling off, obviously between 2008-2011 this logic didn’t apply, however that ratio never recovered in terms of new entrants which I’ll come to later.

Auctioneers, car dealerships, tied agencies, accountancy firms as well as casual Brokerages plus the core Life, General and Mortgage market made this 3,700 figure in 2010.

Since 2010 the regulatory pressures, technology, consumer behaviour as well as an aging profile in the industry have lead to a shrinking number of intermediaries. This is good news for full time Brokerages!

I estimate that there are circa 1,100 Brokerages in the country, of these;

·       950-1,000 are core financial planning, pensions, life etc.

·       100 core General insurance Brokerages

·       50 composite Brokerages doing both Life & General as a dual focus

·       300 Mortgage Brokerages with only 150 doing Mortgages in a proactive fashion against incidental, overlapping the above figures

A good example of forced exits in the business were accountancy firms who were allowed to carry out Life & Pensions business on an incidental basis, escaping Central Bank regulations if it was 20% or less of their overall turnover with little policing, wholly unfair to consumers and to Brokerages. Significant Life/Pensions business was written and written poorly. In September 2018 the IDR which forced 600 Accountancy firms to do a bridging application or exit financial advice, only 60 firms did this bridging exam although a loophole allowed IIA activities to continue, again good news for Brokerages!

Consolidation is happening, but not at the rate some may regularly state, the General Insurance side of Broker-land certainly is though as it goes through a purple patch of takeovers with private equity money in Ireland.

Goodbody(abandoned), Brewin Dolphin, Arachas, Irish Life buying Acumen & Trust, APT and CityLife as high profile Brokerages via Invesco, Davy acquiring a stake in Metis, Harvest Financials sale that didn’t happen, but showing the appeal of the Irish market to a heavy hitter in the U.K in St. James Place as well as several deals I’m currently advising on show that the appeal and appetite is there. This isn’t confined to larger deals, smaller deals are occurring regularly. What I’m really seeing here is a landgrab for AUM, which we again discussed at the above TAG meeting when it came to discussions on networks in the U.K.

The death of the 1-2 person Brokerage has been cited for 15 years by many since I;ve worked in the sector, yet it hasn’t occurred, if it didn’t happen in 2008-2010, I dont belive it will happen now. 7 Central Bank Brokerage authorisations that I’ve been privy to in the past 18 months have all been 1-2 person directorships, the barriers to entry aren’t what they were with the Central Bank. Technology, education and competitive advantages over direct channels have equalised many issues, plus a more professionalised smaller Brokerage number are all positives for those planning to still trade in the next 5 years, more business but less Brokerages!

Direct channels are realising the value of wealth management, pensions etc. with the likes of KBC posing an interesting threat by both entering the market as a bank with a smart technology pension proposition also in 2020.

Technology is the Life & Pensions Brokerage industry achilles heel. Bank of Ireland and others are currently investing heavily in the wealth management/financial planning space.  There has been a good leap with Covid-19 for us all, however it is coming from a very low base.

Based on our sampling from the recent CPC-116 exercise, 10% of Brokerages don’t have a website, only 3% who did allow for any kind of embrace of E-Commerce interaction from booking client meetings, to allow for some kind of transaction, however basic. 97% of websites were static, generic brochure type websites, with no interaction and an awful lot of outdated content. This is a negative mark against the industry in the modern trading environment. On the ClearChoice side of the house we are just about to launch our E-Commerce solutions to allow zoom meetings be booked in etc. however this should’ve happened sooner instead of waiting on Covid-19 as an accelerator.

Straight through processing, poor client data amongst other things must be improved for our industry to grow, however thankfully we are seeing good movement. I include ClearChoice in this as a company that needs to meet the challenges of technology for Brokerages. These objectives are manageable if all Brokerages, product providers and technology solutions working collectively, not in isolation.

A few predictions for the Brokerage Industry within the next 5 years;

·       I estimate that in 5 years time there will be 800 core Life & Pensions/Financial Planning Brokerages in Ireland trading. This will be a core group of full time professionalised Brokerages, from Corporate Brokers like Mercer down to the one person operation. Networks and supports will be key, something we aren’t strong on in Ireland.  There will be more business and demand for financial advice for a smaller cohort of Brokerages due to the individualisation of financial affairs

·       Banks will eat into the Brokerage market share of financial planning advice which stands at 71% as of the end of 2019, they are already focusing sharply on this

·       Cashflow modelling will become recommended best practice, similar to the UK/FCA experience due to more outflows on DB schemes

·       Clients will be far more demanding/engaged in their financial advice experiences digitally.  From valuations checking, to factfinding online to education demands on your services as financial advisers.

·        Education selling will become the norm through knowledge sharing, not product information

·       Auto-enrollment still won’t be in place, I was at Dept. of Social Protection green paper meeting on the same in 2007!