A private report prepared by licensee Godfrey Pembroke’s practice development group (PDG) – a representative group for advisers – was handed out at the dealer group’s national conference in August, and has been the catalyst for a wave of practices leaving the group.

The report was requested on behalf of advisers and canvassed the market for alternatives to their current licensing arrangements, Ascent Wealth managing director Mark O’Toole, a former PDG board member, says.

“We did some work with Godfrey Pembroke practices to assess the marketplace and we delivered that to advisers,” O’Toole says. “Whether they wanted to stay or go was not really what we tried to determine, we just determined who was out there.”

O’Toole says the report was “quite objective” and was not meant to facilitate advisers’ exit or advocate that they leave Godfrey Pembroke but to “help them be informed”.

The PDG is independent of the dealer group itself and represents the interests of 78 Godfrey Pembroke advice practices. It is also a separate entity from Godfrey Pembroke’s advisory board, which is made up of about 12 advisers invited by the dealer group to act as a “sounding board for strategy”, O’Toole explains.

He says he subsequently resigned as a member of the PDG, along with several other board members, as part of a “scheduled rotation”. O’Toole remains a member of the Godfrey Pembroke advisory board.

Godfrey Pembroke general manager Alan Logan confirms the existence of the report and applauds the PDG for “playing a role in educating the advisers about the broader themes in the marketplace”.

Logan says the dealership group is working closely with the PDG to best serve its advisers.

“We’ve been working with them for the whole year as they’ve presented their ideas around where they thought Godfrey Pembroke should evolve to and – in that context – their frustrations about what should be improved,” Logan says. “We have really transparent dialogue with the PDG.”

Advisers on the move

The Godfrey Pembroke dealership group has been in flux since making public its desire to break away from National Australia bank – which owned it, along with several other dealer groups including GWM, Apogee and JBWere – in April this year.

Shortly after that pronouncement, then-head of NAB’s consumer banking and wealth division, Andrew Hagger, announced that the banking giant was set to sell the lion’s share of its wealth arm. In July, it was announced that ex-Perpetual chief executive Geoff Lloyd would lead the excised MLC business group but this didn’t stop Godfrey Pembroke advisers from venting their frustrations about the group’s direction at the dealer group’s annual national conference on the Gold Coast in August, when the report was presented.

In the last few months, a number of advisers have left Godfrey Pembroke and fewer than 120 remain. In March this year, there were 140 registered advisers within the group; in May 2016, the dealership group had 170 advisers registered with ASIC.

This number is expected to remain steady until the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry delivers its final report in early February, after which another wave of defections is expected to begin.

Several advisers have become self-licensed or banded together to form smaller licensed firms, while some – most recently – have joined Melbourne-based dealer group Oreana Financial Services.

One Godfrey Pembroke adviser – who was reluctant to be named due to a non-disclosure agreement ­– says the trend of defections “was not instigated by a breakaway group” but is more a case of “a collection of advisers leaving the group at the same time”.

Forte Dealer Solutions associate director Stephen Southwood, who helps broker deals between licensees and adviser groups, also denies there is a consolidated breakaway faction. Southwood says he is in active talks with individual Godfrey Pembroke licensed advisers, but is not engaged through any representative body.

“I understand there is a move by a number of advisers to become active in breaking away,” Southwood says, “but not as a group.”

Cream of the crop

Godfrey Pembroke advisers are commonly viewed as among the best in the industry and were one of the first large groups to advocate fully for fees-for-advice, in 2006. General manager Logan says the advisers have a “proud history” and notes that the group made a strong move towards “having only active client relationships in 2011”.

Southwood says the integrity of Godfrey Pembroke’s advisers is part of the reason they may be uncomfortable working under the institutional umbrellas of NAB and MLC.

“Largely speaking, they are good, high-quality advisers,” Southwood explains. “They’re generally ahead of the curve in terms of quality of advice and the quality of their clients, but I think a lot of them struggle being aligned with a vertically integrated group.”

Logan says these sorts of frustrations are “industry wide”, and that Godfrey Pembroke advisers see “the standing up of MLC as a good thing, a strong positive”.

He says Godfrey Pembroke advisers aren’t frustrated with any lack of direction from the dealer group’s leadership or their institutional owners. While he does “hear questions around vertical integration”, the main concern of advisers is the pace of change in the industry, he says.

“Advisers usually talk to us about the volume and extent of change in relation to licensee standards and compliance,” he says. “It’s not so much questioning the practices themselves, just the volume and the speed of change.”

He notes that Godfrey Pembroke is preparing for a shift towards self-licensing by getting ready to offer “a business-to-business services offer”, which will be ready to launch early next year.

Logan doesn’t think more advisers will leave the group after the royal commission’s report, predicting instead that “the pendulum will swing back to a more normalised environment”.

Southwood thinks otherwise but notes that it won’t be because of any lack of internal leadership at the dealer group; rather, advisers will be seeking to control their own destiny. In this, he says, they aren’t alone.

“Ultimately, there comes a point where you say, ‘I’ve got to take control.’ But it’s not isolated, this is happening all over the place,” he says. “There’s massive unrest and desire to move but the question is where to?”

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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