Dealer discounting may lead to price war

Dealer networks are reporting an increase in planning practice enquiries as uncertainty over Future of Financial Advice (FoFA) reforms and changes to platform technology have many principals weighing up their options.

In particular, smaller dealer groups are offering discounted rates to planners who have left their FoFA compliance to the last minute.

Chairman and CEO of national dealer group Sentry Group Advice, Murray Hills, says elements within the industry are battling to retain existing advisers while incentivising new recruits to join their organisation.

“The new FoFA environment and increasing demand for dealer groups to provide competitively priced services and programs to support the individual business models of advisers will be high on the ‘shopping list’ of all practices and principals,” he says.

Hills added that Sentry has costed its offer to be competitively sustainable for advisers who are now looking for stability and leadership from their dealer.

“There is a lot of discounting and a price war going on particularly with the smaller dealer groups, which will only cause serious heartache for advisers in the future,” he says.

“The better advisers understand that, coupled with service and reliability, it is in their best interests for their dealer group to run a profitable business, and never more so than with FoFA around the corner.”

Financial planning group, Premium Wealth Management, recently recruited Pearman Financial Management, bringing the total number of practices under its masthead to 21.

While CEO Paul Harding-Davis has ambitions to grow the business to 40 to 50 advisory firms, he hasn’t set a specific goal for 2012.

The group is actively recruiting advice firms who wish to maintain business autonomy in the wake of wide-scale buy-outs by major banks and institutions.

“What is more important to us is ensuring the recruitment of advisor firms that fit with the Premium culture and model,” he says. “Our aim is to add a few high quality practices such as Pearman each year.”

Harding Davis agrees that the prevailing mood is concern about the level of uncertainty still remaining about much of the new legislation and the timeframe involved, particularly the changes to software and platform technology.

However, there may be a silver lining.

“In some respects, FoFA strengthens the positioning of a group that facilitates advisers being able to use a variety of solutions depending on what works best for the client and their adviser,” he says.

It is this flexibility that appears to have been the clincher for Sydney’s Pearman Financial Management – a specialist practice focused on risk insurance.

“We were looking for a business model that would allow us to further develop our risk management specialisation,” says principal advisor, Glynn Pearman.

“Premium offered a far more flexible model than other dealer groups, one that allows us to manage our clients in the way that has worked for us for many years.”

Pearman Financial Management is comprised of two principals and four staff and services approximately 500 individuals and families on Sydney’s North Shore.