Bridges Financial Services, the dealer group IOOF owns, is reviewing its referral agreements with mutual banks and credit unions around the country. This review will result in changes to what one person has described as a lucrative source of client leads for Bridges’ advisers over the years.

Teachers Mutual Bank, one of the country’s largest mutual banks, which provides financial services to educators and has more than 200,000 members and $7 billion in assets, has confirmed with Professional Planner that Bridges has said it is reviewing how it remunerates financial institutions for client referrals and will be making some changes.

Bridges chief executive Nathan Stanton said the assessment of its referral agreements is part of a regular review and is not in response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which has called into question ongoing fee arrangements.

Under Teachers Mutual Bank’s current arrangement with Bridges, if it refers members to a Bridges financial adviser, the member network has the potential to receive a referral fee ranging from 0-30 per cent of any entry fee or any ongoing fee the client pays to Bridges, a Teachers Mutual disclosure document states.

Bridges has similar referral arrangements with hundreds of credit unions and mutual banks around the country, in every capital and in many regional cities, a person familiar with the agreements says. It provides professional financial advice to members of more than 100 mutuals from offices right around Australia, IOOF stated in its 2016 annual report.

Broken Hill Community Credit Union, Community First Credit Union, Endeavour Mutual Bank, QBANK, Police Credit Union, Border Bank, CUA Group, Hume Bank, Pulse Credit Union, Firefighters Credit Co-operative are believed to be among the many institutions referring clients to Bridges planners as part of agreements now under review.

The income the referrals generates is an important revenue source for the credit unions, the person familiar with the deals commented. This person also said the client referrals were an important value add for Bridges advisers.

“[The client referrals are] absolutely lucrative, it’s not just money for jam,” the person said. “Not many Bridges planners come and go…As an adviser, you need to hunt and gather but if you’re in the Bridges network, you don’t have to hunt as much if you’re able to have these kinds of referral sources,” the person familiar with the agreements, who spoke on the condition of anonymity, said.

Bridges had 173 authorised representatives in the middle of this year, Professional Planner’s most recent licensee survey showed.

IOOF completed the transfer of Bridges advisers’ clients’ funds from its aligned Portfolio Service platform to the group’s more contemporary, newly enhanced retail platform, IOOF Pursuit, last year. Nearly 40,000 client accounts and just over $7 billion were successfully moved to IOOF Pursuit, the company announced at the time. The funds under advice garnered via its referral partnerships with credit unions and mutual banks are now to be managed within the Pursuit platform.

IOOF had $109.5 billion in funds under management, administration and advice at the end of last year, annual report disclosures showed.

Last week, IOOF announced it would split its superannuation trustee business from its managed investment arm, following action by the Australian Prudential Regulation Authority to disqualify IOOF managing director Chris Kelaher, chair George Venardos, chief financial officer David Coulter and two other executives from being superannuation trustees. The APRA action centred on an over-distribution made by IOOF subsidiary Questor, which at the time was responsible for a super fund and a cash management trust.

The APRA action may cast some doubt over the transfer of aligned dealer groups FS Partners, RetireInvest, Millennium3 Financial Services and Elders Financial Planning, which IOOF acquired as part of the agreement it inked late last year to buy ANZ’s OnePath pensions and investments business. The ANZ-aligned dealer brands are supposed to sit alongside IOOF’s Bridges, Shadforth, EWM, Consultum Financial Advisers, Lonsdale, and Ord Minnett Financial Planning.

ANZ deputy chief executive Alexis George said in a statement last week the group would assess its options relating to the deal, given the APRA action.

Smith is the editor of Professional Planner’s print and digital platforms. He is an experienced financial journalist, editor and multimedia producer who has held senior editorial positions both in mainstream press and trade media.
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