Deloitte's Tim Worner and Mark Ryan

Wholesale and high-net worth advice firms are giving clients the choice of either being treated as a wholesale or a retail client according to Deloitte investment and wealth director, Mark Ryan.

Speaking on a webinar with Deloitte partner Tim Worner, Ryan explained how over the last 12 months the consultancy firm has observed a trend for advisers to put the onus of classification back in the hands of clients who could technically qualify as wholesale.

“The firms that we’ve been talking to [say] ‘we allow our clients to choose’; do they want to be treated like a retail client or do they want to be treated like a wholesale client?”.

For clients that qualify as wholesale yet wish to be treated as retail, he says, there needs to be an awareness that this means more protections but could also involve a higher advice fee.

“As soon as they say ‘hang on, what does that mean? in a practical sense, [they say] ‘ok we’ll treat me like retail, that’s fine, I’m happy to be fully informed of what services I’m going to be provided and with and what costs.

“Not to say that the wholesale are missing out but indeed they’re giving them the opportunity to be treated retail with retail provisions.”

The tendency for advisers to manipulate their models like this is part of a wider trend for advisers to rethink advice business models, Ryan explained.

“We get the data coming out once a quarter and we have seen a lot of independent businesses and private businesses being spawned in recent time, and they’re saying I don’t necessarily have to subscribe to the business model of my licensee and yes I will pursue those high net worth clients and I will get into the space that maybe the accountant plays in moreso.” he said.

For the firms in the high-net-worth space, that could mean commercial pressure from advisers trying to move into the sector. This dynamic is being exacerbated by the flow of advisers out of the banks and AMP, he noted.

“Private client businesses will come under more pressure,” Ryan said. “If they’ve hung onto what they’ve gotten to this point there will be some advisers moving out of those aligned institutions trying to push into that high net worth space.  At the same time there are businesses out there that are saying ‘we only want to deal with wholesale clients, we don’t want to deal with retail, we’re going to get burnt’.”

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. Contact at [email protected]
Leave a comment