There is a surge in the number of institutionally owned financial planning practices moving into the non-aligned and independent space, according to businesses providing external licensee services.
“We are receiving at least a few calls each week from advisers who are institutionally-aligned, and they call us asking whether they should look at self-licensing,” says Simon Micallef, head of advice, Netwealth Advice Group.
These enquiries come through Netwealth’s Pathway Licensee Services, which provides a combination of compliance reviews, AFS license applications and other licensee services.
Micallef says around half of these enquiries result in the customer taking out their own AFS license. “The other half say ‘really, my intent was to leave the dealer group, but I didn’t know what else to do.”
He explains they offer three core outcomes to those who approach Pathway with the above questions. Along with offering to undertake the application process on behalf of their client, other options include offering them a position within Netwealth’s salaried or self-employed advice businesses.
Financial Planning Services Australia is Netwealth’s salaried dealer group, while Bridgeport is its self-employed channel.
“We’re actually acquiring businesses at the moment, and tucking them into Bridgeport as part of our future succession plans,” Micallef says.
He believes the key reasons why financial planners are increasingly seeking out other opportunities are dissatisfaction with restrictions around the products they can provide, or with the level of service they receive for licensee fees.
“We have advisers that really do come to use because of either restricted approved product lists (APL), or they feel they’re just a number [to their licensee] and not getting good service.
“I don’t think we’ve even hit the peak. Progressively, I think we’re just seeing the crest of the wave, we’re seeing more of a flight to open market and mid-tier dealer groups,” Micallef says.
Countering bad reputations
Soula Cargakis, chief executive officer of Centrepoint Alliance’s Associated Advisory Practices expresses a similar view.
“We’ve definitely seen a bit of a spike, and most are [advisers from] banks and institutions. And I think, for some of them, it is that continued uncertainty over regulation and some poor public perceptions of advisers.
“They want to have their destiny in their own hands and be responsible for their professional reputation,” she says.
AAP currently provides support – including access to peer groups, professional development days, and webinars, to more than 1000 advisers across 208 licensees. According to Cargakis, there are currently around 10 more licensees in the pipeline with them, and others weighing up their options.
“I think the trend is more about control and flexibility. It doesn’t mean they’re going to go off and do anything unusual, it’s just that they like a choice of what sits on their APL, for example, what solutions they’re going to provide, and what they want to do with their business.
Hinting at the reputational damage inflicted on a number of institutionally owned dealers groups, she also suggests that, “for quite a few of them it is about branding.”
Branding was also referenced in Sunday’s final report from the Financial Systems Inquiry. It suggested financial planning practices should be compelled to make their ownership frameworks via AFS licensees and corporate owners more transparent, possibly through clearer branding obligations.
“I think that’s great. Even as a service provider, we’re a Centrepoint brand, we’re AAP, and we make that very, very clear. And I think that that should be very clear, if there is ownership there,” Cargakis says.
She also makes the point that institutional ownership is neither a positive nor a negative. “And for some customers, knowing that might give them a sense of comfort. I think they need to know who the adviser belongs to. I think transparency is important.”
A platform competition
Paul Derham, partner at legal practice Holley Nethercote, suggests the movement from institutional to non-aligned and independent practices is more of a gradual but steady flow than it was last July, which he describes as “a glut”.
“We had the biggest glut of enquiries before 1 July, when FoFA came in… we had a large number of corporate authorised representatives getting their own license.
“I think that it really is actually a competition to get money on platforms,” he says, suggesting other banks and institutions are competing to bring more financial practices into their businesses.
“I think they’re all doing similar things – whether they’re bank owned or independently-owned. Even the independently owned will have a deal with a platform.
“Let’s say they want to put on a financial practice that’s with another business. They’ll look at how many of their funds are on a platform, and if they’ve got the same platform, they’ll offer them an incentive to come across.
