The future of financial advice – the practitioners’ perspective.
Insights and analysis from leading industry figures.

Part 2: The non-aligned dealer group.

Phil Butterworth

Phil Butterworth
CEO, DKN Financial Group

The next three years is going to be the biggest land-grab opportunity in the wealth management space, for those organisations that can adapt.

In the context of that, is there going to be a future for non-institutionally-aligned dealer groups, and what are the characteristics of those groups? What’s the advice fee structure going to look like, from a cost point of view and, finally, in our sector, is consolidation a myth or a reality?

Is there a future for the non‑institutionally-aligned dealer group? Well, in our view, absolutely; and I suppose the way we’re looking at it is, the reforms and the changes that we’ve seen in the past, and reforms that are coming, are going to be a bit like dose of Round-Up in your garden bed. The good will flourish, and it’s going to be a great opportunity to remove those elements of the industry that shouldn’t be there. And through that process, professionalism will rise, and the quality of advice going out to the public is going to be enhanced.

So what are characteristics of a successful non‑institutional dealer group? I’m going to break it up into three areas. The first one is the offer; then the adviser mindset; and then, finally, the platform and technology solutions, and how they’re going to be delivered.

“Gone are the days of counting numbers; it’s about fewer, and more quality”

First of all, in regards to the offer, there’s going to be a massive change around the way dealer groups are viewed. Firstly, dealer groups are viewed right now as a form of distribution – that’s their value. So in the past, the liquidity event for a dealer group has been the sale to an institution, with the view of [the institution] getting distribution of their products and services. That’s going to change, and is changing.

“Gone are the days of counting numbers; it’s about fewer, and more quality”

The offer from the dealer is going to be more about how do we add value to the practice, and therefore [get] better quality advice out? So it’s not just about who can be licensed, how many numbers can we grab for distribution; that is the old world. Moving forward, there’s going to be a lot more focus around business solutions, around governance, or the fiduciary obligations, around best practice solutions, around technology. And you’ve got to have the scale and the capability to invest into those solutions as a dealer group to be able to then provide that better quality [advice] out.

The next part, around that offer, is that it’s going to be priced, and the transparency of fees around those offers will be out there for the public to see. Gone are the days where there’s going to be a grab for advisers; a lot of the “Come and join a free dealer” [offers] will go. No longer will it be sponsored from the manufacturing side. Dealer groups are going to have to stand up in their own right in regards to providing quality services that will be transparent from a separate fee [perspective].

And therefore your adviser mindset will change. The adviser mindset, to date, has been, “What can we get for free? What is the cheaper dealer offer?” Now, with all the reform changes moving forward, most advisers who speak to us, for example, are saying, “How can you assist us? What tools, what services do you have? What is the cost of that?” Are you happy to pay to access those services to be reform‑ready?

So the adviser mindset is changing, and therefore, who you recruit or who you actually offer your licence to is going to be a lot more selective. Gone are the days of counting numbers; it’s about fewer, and more quality.

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