Disagreement around future of independent advice

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Advisers don’t understand the true cost of independence and this could ultimately lead to the end of independent advice according to Pinnacle practice director Anne Fuchs.

Fuchs has become alarmed at the rapidly shrinking independent advice market, and questioned if the “end is nigh” for that sector of advice. “The number of truly non-aligned dealer groups, that are well-established and have a good track record, is now so small I can count them on two hands and have fingers left over,” she said.

Fuchs said many non-aligned dealer groups have institutional ties via wraps and platforms, and institutions are increasingly taking strategic shareholdings in boutique groups that are running IFA models, in order to attract more advisers into their dealer groups.

The biggest problem is in the costs associated with running a dealer group. These costs are heavily subsidised for institutionally-owned dealer groups, and Fuchs says many advisers don’t fully comprehend this until they look at leaving the group. “They then have some very commercially difficult decisions to make.  It is not uncommon to see advisers decide that the cost to be non-aligned isn’t worth it.”

No More Practice founder Vanessa Stoykov doesn’t agree that FoFA, and increased costs associated, are solely to blame for the decrease in non-aligned firms. She said much of it was down to an ageing population, and advisers reaching an appropriate age to retire.

“I think that there’s still good, strong, independent groups out there and I think anyone that for anyone that matters to, there’s groups and licensee groups you can join that are independent. I think some people may well feel overwhelmed by legislative requirements and a flight to safety is possible.

“I don’t think it’s the death of the independent sector that’s for sure. I think there’s more demand than supply. If you talk to most of the brokers around, they’ll say that.”

What do you think is in store for the future of independent advice? Share your thoughts below.

  • james walker - powell on 18/03/2013 5:19:53 PM

    My god what would Anne Fuchs know . Why would anyone ask a dill like her what she thinks . I would say there is no room for Anne Fuchs in our industry

  • GAB on 18/03/2013 11:30:39 AM

    I think this topic has already been discussed (alot). ASIC is not in favour of a whole stack of small and medium sized non-aligned...too hard to police, and investor compensation is more important to the regulator than whether one is independant or not. Independants will need to merge/join forces to get scale, otherwise they'll be priced out by the majors. Sad, but true. Your local financial adviser might seem independant but more than likely is owned by a bank. The regulator can keep plowing ahead with FoFA but it has nothing to do with independance or providing more affordable advice to the community...nothing nil zip.

  • Bruce on 18/03/2013 11:11:50 AM

    I agree with Vanessa, there is a strong group of independent dealers out there, yes the number may have contracted but that has left a better quality group remaining, at Wealthtrac our clients are virtually exclusively independent dealers and we are seeing growth in our market mainly because of FoFA

  • Sheila on 18/03/2013 10:59:28 AM

    Independence really is in the eye of the beholder. From my perspective there is a viable third option that doesn’t get much airplay... go get your own AFSL and opt out of the Dealer Group debate all together. There is a real difference between having your own AFSL as a Financial Planner/Practitioner and running a Dealer Group. Post FOFA I’d rather not be running a Dealer Group.
    As the holder of your own AFSL, your signalling to the community that you are in the business of giving Financial Advice and charging your clients for it.
    You deal directly with ASIC who by and large are on our side, engage external compliance and CPD support, buy your own Professional Indemnity Insurance which in my experience is on par with what I used to pay in Dealer land.
    You use the Fund Managers, Margin Lenders and Insurers on your terms when you need them. They are just as helpful if not more. And believe it or not have more time to do what we do best, Give advice to our clients.
    Cue the naysayers from Dealerland ....now

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