Financial advisers are rejecting vertical integration and are prepared to vote with their feet in what could be a death knell for the long-running trend towards consolidation in the industry.
Pinnacle Practice director, Anne Fuchs, who launched My Dealer Group in Brisbane last month, says there is a sense of urgency to many of the adviser inquiries she is fielding.
My Dealer Group is a matchmaking service designed to help advisers looking for a new licensee.
Fuchs believes this desperation is being fuelled by frustration and a desire to run their practices in their own way.
“It’s love on the rocks for these advisers – they have clearly fallen out of love with their licensees,” she says.
“The passion has gone, they’ve outgrown their current licensee and are looking for a new relationship to energise and motivate them.”
While Fuchs is reluctant to single out any particular dealer group potentially facing a mass exodus, she says those that claim a semblance of independence while pushing a parent company’s product are most at risk.
“In my experience, advisers have lost patience with recruitment calls and vertical integration,” she says.
“Most just want to make a final decision and get on with business with a like-minded licensee.”
Loyalty payments are a particular area where advisers are seeking guidance.
The My Dealer Group service offers independent licensee/adviser compatibility assessments.
Licensees pay a fee to become a member of the My Dealer Group panel and their offering is then showcased to the advisers identified as most suited to their businesses.
Fuchs says she is fielding inquiries from advisers all over Australia who are in relationships with a range of licensees.
“We’ve had advisers call us from most of the mainland capital cities but also from regional areas in Western Australia, Tasmania and Queensland.
“And we’re not just taking inquiries from the small end of town. We’ve also seen interest from some well-established and very big adviser practices.”
I agree with you Ben and sadly there are many licensees who “not so gently insist” that you integrate their products into client solutions. Lets face it- the vertically intergrated models need you to write their platforms and their funds. That’s the only way they can stay in business i.e. by cross subsidising the losses they make from running a dealer group with internal accounting transfers relating to proprietary products sold and rebates from other institutions with whom they have arrangements.
This is precisely the sort of behaviour that an increasing number of advisers will resist. I predict we will see more disenchantment as the institutions continue to promote expensive platforms and products to fund their financial obligations… leaving advisers with little alternative than to truly accept their fiduciary responsibilities, put client best interests first and walk!
For any advisers who have moved across to an institutionally aligned licensee, for the perceived support they will receive only to find after the honeymoon period that they are getting treated as a product distribution line, surely you can’t be shocked.
There are licensee’s out there who have a focus to simply look after advisers, and let you do what you should do, give advice (I am lucky enough to have found one). If your licensee is pressuring you to distribute specific products, or sell specific platforms so they can benefit from rebates etc then you have two questions to ask. Is this behaviour appropriate, and would a professional adviser condone such behaviour!