President of the Boutique Financial Planning Principals Group Claude Santucci says advisers are seriously questioning the benefits they are receiving from their dealer groups.
A recent piece on Professional Planner Online, “Challenge and consider changing your licensee” reflects the advice given to members of the Financial Planning Association (FPA) of Australia by the chief executive, Mark Rantall, to stand up to their licensees or employers if they are put into a situation where they cannot act professionally and in their clients’ best interests.
The advice is sound: try to change things internally, get your colleagues to support the changes and, if that fails, seriously consider changing licensees.
Those with the required courage and tenacity to attempt change within their licensee certainly have the qualities to operate under their own licence, an option that ought to be given serious consideration.
As professionalism increasingly takes hold in financial planning, advisers will seriously question the benefits they receive from being licensed through someone else and address the inherent problems of ownership and disclosure.
I am not suggesting that financial-planning practices owned, in part or full, by an institution or dealer group cannot offer good advice, but it is perfectly reasonable to consider the difficulties in managing inherent conflicts.
What do you do when the advice you want to give your client is not the advice your licence owner wants you to give, or at the very least, prefers you to give?
Full disclosure
Professional financial planning comes down to putting clients’ interests first.
Enshrining the term “financial planner” in law will help, but it is only a part-solution.
As long as there are financial planners employed by institutions with product to distribute, there will be pressure to distribute those products. I make the proposition that full disclosure of the ultimate owner of the licence is just as important as giving a legal attribute to the term “financial planner”.
Unfortunately, full disclosure is not high on the regulator’s agenda. Based on my own experience, I have long held the view that the dealer-adviser model has flaws that have to be managed very carefully.
There is an inherent conflict between the adviser and the dealer based on the fees earned by the adviser and the portion shared with the dealer. The more successful the adviser the sharper the focus on that portion paid to the dealer.
The problem hit me in my last year with a dealer when I had to give away a substantial amount of income for services that I considered average at best and unusable at worst.
Additionally, within our practice, the competition for business between four advisers in one practice, essentially running four separate businesses, under one licence was fierce and often bordered on conduct unbecoming of professionals, even adults.
I believed then, and still do today, that a better way forward was to get my own licence. The success of that practice over my 13-year involvement and since is proof that the decision was right for me and for our clients.
I often hear that it’s all too hard to get your own licence. Putting aside the well known fact that anything worthwhile is often more difficult than the easier or temporary option, I can attest that it is not so difficult. Time consuming, certainly, and more complex than it need be, but, for many, it is the path to true professionalism.
The Boutique Financial Planning Principals Group (BFPPG) was established over eight years ago to address the specific issues of independently owned financial planning practices that had their own licences.
Over the years, our members have collectively built up a wealth of experience and knowledge in this area, which is available to anyone seriously considering obtaining their own licence.
All of the resources of the BFPPG are available to associate members as they work towards their licence. Membership has increased through referral and has come mainly from advisers disenchanted with their dealer relationship.
I understand that many advisers want to be free of the responsibilities that come with the licence but they value the ability to give advice free from outside influence.
To them, I would advise changing to a dealer group that is not institutionally owned so as to remove the potential conflicts that limit true professionalism.
Claude Santucci is president of the Boutique Financial Planning Principals Group.
The financial services industry is structurally corrupt when it comes to financial advice, and for many advisers their employment or licensing depends on working within the rules set by the major product groups. The FPA has never stood up to these licensees or product group employers so why does Mark Rantall think individual advisers can risk their positions to speak up?
My licensee’s approved list kept all the really bad GFC investments off the list.
I didn’t need to reseacrch Westpoint, ACR, Great Southern Trees, ABC Learning etc. It was already done and assessed as rubbish. It saved me a lot of time in research & quite possibly saved my clients from a heap of losses.
Even when clients asked about mezzanine debt products I was able to explain that they didn’t pass the quality gates.
Preserving reputation is close to priceless. I’m not saying I would have used these products – but I could rely on the licensee to weed the rubbish out which saved me a heap of time.
I have had my own license for longer than I can remember. My reasons are pretty much as described by Claude. As a dealer we have also tried to redefine our business model as a business that provides a fee for service experience for our advisers. Our Advisers only pay for the back office services they require, our model is about providing cost efficient services that help the adviser and the Adviser’s clients. I believe there is a role for dealer groups, but it isn’t about pushing product or clipping commissions, it’s about scale and efficiency, which should benefit consumers if done right.
I left my dealer group ten years ago and obtained my own licence for this very reason. The large groups have agendas which are quite different from the concept of putting the client first. The group that I left was even beginning to call my clients “customers”. They had no concept of the client/adviser relationship, other than to see it as a threat to their FUM. I am now free to give my clients the advice that best suits them, and with an accounting background, see myself as being a true professional. Sadly, I’m almost at the point of going out of business as a result of all the bickering and politicking that has been taking place in recent years. I find it harder and harder to convince people that I am not like all the rest.
I completely agree with you and we now have our own licence with the appropriate conditions to meet our clients needs. We are now building our own platform so we can offer more appropriate investments from any provider at normal market rates.
We want to offer our clients term deposits from any bank in Australia and life insurance attached to our super wrap platform from any underwriter that meets our clients needs and NOT those choosen by someone else.
As a dealer group we run in partnership with our advisers on a 50/50 basis and it is our responsibility to market our services and obtain new clients.
The adviser’s role is to do all the face to face with the client and our role as the dealer group is we prepare the SOA (Paraplanning) and we place all the investments (we operate our own trading desk and bulk trade to bring economes of scale).
We are putting our fact finds on the internet so we can do reviews anywhere or anytime effectively.
We just do things better than everyone else. Our advisers will be better paid and better resourced and enjoy real participation in our business of looking after our clients.
Time for Claude to recognise that there is a big difference betwee the Institutional owned AFSL that may have either employee’s or contractors – and the non-aligned AFSL’s who have a well researched but “non-aligned” APL. This sort of gereralisation by Claude that all Dealer groups are the same, really gets up my nose and does nothing to promote the need for advice.