ASIC may be keeping a close eye on vertical integration, but some industry professionals clearly see it as the way forward, particularly for independents.
Matrix is one planning firm that has recently forayed into the vertical integration model in its alliance with Russell Investments. The group posted positive returns for its Partnership Funds, which support the dealer through investment management fees.
The AIOFP has supported the move by Matrix and thinks that other independently-owned planning firms should follow suit.
Peter Johnston, AIOFP executive director, says, “We are never going to have the perfect market of independent advisers charging clients a fee and then selecting strategies/products from manufacturers who do not own distribution.
“What we have is a market dominated by institutions and industry funds operating loss leader/vertically integrated models where it will only work if the advisers are selling the owners products.”
PCM has been doing this since 1999 with IOOF, Asgard and now OneVue and Mercer for members. The Mercer joint venture will be launched at the AIOFP's Hobart conference.
However, Johnston says that advisers who participate in platform profit shares are being labelled unfairly as ‘conflicted’ by other parties.
“Institutions do it, industry funds do it, SMSF promoters do it, Coles and Woolies with petrol do it, everyone without exception within the industry cross subsidises – why can’t independents do it?” asks.
He says that ASIC is acting on “very poorly thought through confusing legislation handed to them by the previous government”.