The impact of regulatory change in the financial planning industry has been multifaceted. In the short term it has undoubtedly turned up the heat on all licensees to ensure compliance systems and monitoring of authorised representatives is up to scratch.
But a series of interviews with leading non-aligned financial planning licensees – which will feature in the September edition of Professional Planner magazine – have highlighted some fundamental philosophical differences between institutionally owned dealer groups and their non-aligned counterparts.
Read Professional Planner’s series on non-aligned advice groups:
Part 2: Unity of purpose as non-aligned groups bulk up to compete
Part 3: Proof of non-aligned business model emerging in Centrepoint performance
AFA: Move away from institutions sees non-aligned licensees driving innovation
“As much as FoFA [the Future of Financial Advice] has forced us to make some decisions about our business model, it’s also forced institutions to make decisions about their business model as well,” says Rod Bristow, managing director of Infocus Wealth Management.
“You’re seeing changes in the institutional business model around platform availability, pricing, support models, and those sorts of things.”
Feel the effect
Bristow says that financial planners working in institutionally owned licensees should expect to feel the effect those changes over time.
“A lot of advisers previously, in working with institutional or aligned licensees, would have had more flexibility that what they’re seeing coming from their institutional partners now,” he says.
“[Approved product lists] are being narrowed down; there’s a focus on in-house product, for example, with a number of institutional players; and I think advisers historically have desired more choice and have desired the ability to have an open-architecture APL to give their clients options – if product comes out of the strategic advice process. That’s changing in the institutional space.”
Bristow says success in any kind of financial planning business depends on having robust and powerful systems to underpin the advice process.
“The rise of technology and the importance of technology, particularly your customer management technology is absolutely critical,” Bristow says.
“If you can’t use technology efficiently to provide advice in a more complex environment, your advisers are really going to struggle.
“The role that technology plays in not just allowing advice to be provided efficiently, but in a compliant way, is something that’s really come to the fore trough the FoFA reforms.”
Catalysts for merger
The development of InFocus’s technology was one of the catalysts behind its recent merger with PATRON Financial Advice.
“Any merger has to have three things: strategic fit; cultural fit; and the numbers have to work,” Bristow says.
“We invested a significant amount in our technology in the lead-up to and post the introduction of FoFA. We re-engineered the whole process of being able to manage client interactions in a compliant way. We were looking at that thinking, well, this is a bloody good system; to some extent we think that makes us a natural consolidator in the market. Being able to leverage the capability that technology delivers over a wider client base we saw as a real opportunity for us. That was a key driver.”
Astonishing
Bristow says spending money to keep technology up to date is an unavoidable cost of doing business, but the amount being spent by some institutions – $500 million, reportedly, in one case – seems “astonishing”.
“It’s almost hard to believe that would be your customer retention strategy, to spend half a billion dollars,” Bristow says.
“If anything, that highlights our view – that that [kind of] investment is effectively creating a deeper vertical slice of existing customer base, if you like. They’re retaining the existing customers they have, and providing them with better stuff, to really grossly oversimplify it.
“I think the future is actually diametrically opposed to that. It’s the horizontal slice that matters. It’s the ability to manage customer interactions across multiple platforms, and multiple products and services, to allow customers to have the information at their finger tips to be able to take action.
“And empowering advisers through the use of that technology, so advisers can see what their clients are doing, and being able to provide strategic advice accordingly. I think that’s where the future actually lies.”
“The Beast Awakens” is the cover story in the September 2014 edition of Professional Planner magazine.
