The financial planning industry consistently uses the term “dealer group” to describe a certain type of Australian financial service licensee. The annual “Top 100 Dealer Groups” is an important information resource, both within and outside the industry. Industry awards honour the “Dealer Group of the Year”.
However, the financial planning industry may not be well served by its continued use of the term “dealer group”.
For one, the term has been carried over from that stage of the industry’s evolution when the sales agents of product providers were transforming into pioneer financial planners.
It can be argued that the term is archaic and is inconsistent with the thrust to professionalise the industry. It may also be inaccurate to use it to refer to all financial planning organisations, as not all financial planners are affiliated with a product provider.
A more important question is whether the use of the term “dealer group” contributes to the public’s perception that financial planners are not objective when making financial product recommendations. An experimental study about five years ago found that it does, and offered “financial planning group” as an alternative term.
In the study, a fairly representative email list of individuals across Australia was randomly divided into two groups. Among demographic questions, both groups were asked a main question that differed only in the use and non-use of the term “dealer group”. The first group was asked: “Financial advisers commonly operate under the umbrella of a dealer group that is also involved in selling financial products, do you feel that a financial adviser belonging to a dealer group would be objective when recommending financial products to clients?”
The second group was asked: “Financial advisers commonly operate under the umbrella of a financial planning group that is also involved in selling financial products, do you feel that a financial adviser belonging to a financial planning group would be objective when recommending financial products to clients?”
In aggregate, 35.1 per cent and 29.9 per cent answered “no” in the first group and second group, respectively. This indicates that a larger percentage of the public feels a financial adviser is not objective when the term dealer group is used.
This conclusion was found to be true across all the demographic classifications used. A direct comparison question in the online survey also showed that an overwhelming majority of respondents affected by terminologies felt that advisers belonging to a “financial planning group” would be more objective than those belonging to a “dealer group”.
The research was done around five years ago, but the results are even more relevant now, when the industry has distanced itself from a sales orientation by transitioning away from commission-based fee structures. Furthermore, with the proposed university educational requirements, it might not sit well with graduates of financial planning degrees to find themselves working with a “dealer”.
