The departure of the banks from wealth, otherwise known as “Wexit”, led to advice practices scrambling to find independent licensees after the Hayne Royal Commission.
Satisfied with their licensees until their demise, the speed at which they needed to find a new dealer group created headaches for practices and weighing up the costs versus benefits of prospective licensees.
Speaking at the Professional Planner Advice Practitioner Summit on Wednesday, Verante Financial Planning director Liam Shorte said he’s in a “fairly expensive” dealer group and doesn’t consider paying a higher price a detriment.
“We wanted stability, guidance where it’s needed and the ability to run our business the way we want to run it,” Shorte said.
“You can go for the lowest costs but you’re not going to get the services. Dealer groups don’t make a big profit; very few of them turn a profit. Make sure the right people are in there that you want to work with and that they have the same focus as you.”
Shorte said working with the right people in place that have the same focus as your practice is important.
“If you pick the wrong one you can be stagnant for a long time,” Shorte said.
However, before going the self-licenced route Story Wealth Management CEO Anne Graham was less impressed with the offerings from dealer groups.
“Everyone overpromised, overcharged and underdelivered – like constantly across the board,” Graham said.
Shorte said the drawback with a lot of dealer groups is the services can be one-size-fits-all. His business is heavily focused on SMSFs.
“Problem is that [our practice] isn’t a normal business, we do complex work,” Shorte said.
“When you’re with a dealer group, they’re looking to cater/dumb it down to make sure the lowest quality adviser is doing everything correct, but that takes every other adviser along that route of compliance as well.”
Going it alone
In 2019 when the banks pulled the plug on their association with financial advice, many advice businesses were left scrambling to find a new home.
Graham was with BT licensee Securitor Financial Group for roughly 15 years.
“We wouldn’t have left, we really enjoyed the community, we liked what they were doing and felt supported,” Graham said.
“All I had to do is run a business and give advice. All of a sudden, shit hit the fan and we had to make a quick decision and we decided to get our own license. That came from a place of not trusting anyone.”
Graham said the time the decision to go self-licenced was made to the time it was approved was about three or months.
She added she’d make the same choice again if she had to do it over.
“It’s not less compliance, we’re pretty hard on ourselves,” adding that she does take advice from compliance consultants.
Shorte was also with a BT licensee, Magnitude, and like Graham had considered going the self-licensed route after having already switched dealer groups three years earlier.
He is now with Viridian Advisory, where many advisers under BT and Westpac licensees ended up.
Shorte was concerned when a lot of his peers that were going the self-licenced route cited getting away from compliance as the major reason.
“It just made us a bit scared; PI insurance was going through the roof, you had all these people going self-licence,” Shorte said.
“This didn’t happen but my fear at the time was there will be a backlash from the PI insurers and they won’t do small firms like us, we were two advisers. We thought we’d take the safety of a dealer group that we can feel trust.”
The view from both worlds
Cullen began his journey founding financial advice firm Spring Financial Group in 2010, which started out as a small self-licenced practice that grew into a large, multidisciplinary practice incorporating accounting, tax, estate planning and mortgage broking.
In 2017 the firm acquired the dealer group Wealth Today, at which time the parent company was re-named WT Financial Group.
The acquisitions of Sentry Group and Synchron followed in 2021 and 2022. It has also added Wealth Adviser to offer licensee services to self-licensed practices.
“We saw in the wake of the royal commission, the majority of the so-called malfeasance or sins that were uncovered were publicly positioned as big-branded sins or head office sins,” Cullen said.
“We felt in the wake of the royal commission, either consciously or subconsciously, we’d see the rise of the independent financial adviser.”
Cullen said there was a “great opening” being self-licenced but recognised that until significant scale is built into a business it’s challenging to have the necessary resources in place.
“We saw the opportunity, as everyone was running to the exit [of their licensee] to be counter-cyclical and build something that would provide the services and support we thought was sorely missing,” Cullen said.
