Having an affair with your licensee?

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Dealer groups are reportedly paying cash incentives to advisers to join their business in order to build funds under management.

Anne Fuchs, director of Pinnacle Practice, says that this is unsettling for advisers and that such dealer groups need to take a long hard look in the mirror.

“If advisers are unhappy with their licensee, they will come to that conclusion in their own time. Encouraging them to shop the business around to the highest bidder does not reflect the professionalism we are all working towards,” she said. “If RSVP or eHarmony started running marketing campaigns targeting married couples to explore whether the grass is greener on the other side of the fence, people would be outraged and rightly so. A business model that solicits financial planning firms and encourages them to shop their business around to the highest bidder is exactly the same in principle.”

Fuchs says licensees that pay for a FUM transition are working towards an agency-type model, which is not what advisers are looking for. Advisers that she talks to are seeking something deeper and a partner to help them build their business in the long term.

“If licensees are considering going down this route, they really need to think long and hard about their future and where their business sits in the value chain. Advisers considering joining them need to think even harder,” said Fuchs.

According to Fuchs, high quality dealer groups that will survive in the new world of professional fee for service are those with very clear value propositions, not those who are in the business of paying for FUM. “The decision on which dealer group is right for an adviser comes down to a complete review of a short-list of potentials to ensure they are aligned with business needs,” she said. “It is also worth remembering that like all things in life, advisers will get what they pay for.”

OneVue CEO Connie McKeage has seen this happening for some time and says that she doesn’t have a problem with it, as long as the dealings are completely transparent.

“If they think that what they’re doing is right, then they should be willing to let the client know that they have had this transaction.

“The fact that there is no transparency, you have to believe that they don’t exactly feel good about it…I don’t mind that it’s happening, as long as the customer knows that it’s happened.”

Have you had any experience with dealer groups approaching you or your business?

More stories:

New partnership offer for boutique licensees

Grandfathering: A way around it for advice firms

PI increases unjustified

  • Innocent Observer on 17/09/2013 11:04:24 AM

    Seriously? Comparing dealer group incentives as an enticement to adultery? What a load of crap!! Seriously, Anne, get a grip.

    Maybe for some advisers the cash incentive is just enough to swing them one way or another, or to help with the costs associated with switching dealers. I don't know, and I'd guess (from your ridiculous comparison) that you don't know either. Let's not forget that incentives (whether cost, quality or service-related) are integral to most consumers' decision-making process and businesses' USPs.

  • Advisor on 17/09/2013 11:34:18 AM

    if it helps for marketing and education it helps the business in the long run. so i totally disagree with this article.

  • Mark on 17/09/2013 2:30:03 PM

    What a ridiculous thing to say. If i can save some money on one of my biggest overheads (licensee fees) then I'd be a bad business proprietor if I didn't consider it. I get the feeling this lady runs an expensive dealer group & is anti competition. As i said its ridiculous...

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