BT Financial Group has moved to capture a slice of the non-aligned financial planning market by launching BT Select. The subsidiary will provide business services to firms that hold their own Australian Financial Services Licences (AFSL) as well as those that want to rent a licence from BT.
The managing director of BT Select, Phil Butterworth, says that during the past four years the financial planning market has become “totally dislocated and that’s been driven through [the Future of Financial Advice], poor market conditions and M&A activity”.
“This has created a dislocation of relationships,” Butterworth says. “Clients are questioning the value propositions they get from an advice perspective; they’re questioning fee structures. The government has questioned the advice proposition and fee structures, and… now the practices are sitting there saying, ‘Am I in the right service structure for my practice? Who is the best partner for me, moving forward, for the next generation of industry change? And is the construct of the traditional dealer group the right structure?’”
“All these things are being challenged,” he says, “and I reckon it’s a great challenge.”
Butterworth (right), who joined BT in April this year after spending eight years as chief executive of DKN Financial Group, says there needs to be “a hell of a lot more transparency at every level”.
“What is the value proposition to the client from the practice and what is the fee structure for that?” he asks.
“If you’re a service provider to the practice – and it doesn’t matter who you are, from an asset manager to a platform to a service provider – what is your value proposition, and what is the associated charge with that? There can’t be any crossed lines around any of those revenue streams or that pricing.”
Butterworth says BT Select is structured so a planning business buys only what it needs and pays for only what it buys – no practice will subsidise or support any other.
BT Select is “business-to-business” with practices, he says. “It talks to the practice – how are you going to structure your practice?’”
“They say, ‘We want to buy all these services from you’, and part of that will be a discussion of which licence you want to run under – do you want your own, or do you want to rent one?” he says.
Butterworth says he could have set up “a brand new AFSL to offer that rent-a-licence component” but instead opted to “use the seed of Magnitude as the licensing component of it to help kick-start the business”.
The guts of BT Select
There are three core elements to the BT Select proposition, according to Butterworth.
“The first one is the licensing side. An adviser can select whether they want to run their own licence or they want to rent a licence through Magnitude,” he says.
Butterworth stresses that BT Select is neither a licensee nor a dealer group.
“The way we look at it is, [we’re not] running a dealer group, we’re running a service proposition for wealth management practices,” he says.
“A licence or a dealer group is just a tool that can or cannot be used. So our tool, if you want to rent a licence, is Magnitude. We don’t care – you might be currently licensed through someone else and want to get your own AFSL, and we’ll help you with that.
“The next [element] is the range of practice solutions that we’ve put together. It’s your standard stuff, but other things like specifically designing digital or marketing support for your business; that next journey or technology interface with your clients; it’s the technical helpdesk and the high-net-worth expertise around that.
“The third part is the community of the type of practices we want to pull together. We want to make sure we’re dealing with multi-partner firms; they’re of reasonable scale; if they’re not already fee-for-service then they’re on the journey to fee-for-service; and they’re looking for a business partner to help them.
“We’re going to cap that community at 100 to 120 practices, and we expect to be there in three to four years, and at that point – when I talk about FUA I only talk about FUA on our platform – we expect to at the end of three or four years to have 120 practices and about $7 billion on our platform [BYT Wrap].
“The service proposition we’re designing is not being designed for the lowest common denominator, it’s been designed to service those practices that are on a similar journey with regards to growth.”
