FOFA driving planners into broking

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Mounting regulation and tightening margins have seen a growing number of financial planners try their hand at broking.

Vow Financial CEO Tim Brown said the aggregator has seen an influx of financial planners joining its ranks in recent months.

Changes in regulation and licensing requirements in the financial planning industry – namely the recent FOFA reforms – are a likely factor in the shift, says Brown.

“FOFA is making that business much more complex and I think potentially what planners are looking to do is two-fold – one is to add other incomes to offset some of that extra cost they have now through having to comply with FOFA, and two they’re looking to move into more simple products with less requirements in terms of documentation and regulation,” said Brown.

“The licensing requirements for mortgage brokers are nowhere near as great as financial planners.”

Following NCCP an increasing number of mortgage brokers moved to diversify into financial planning, and Brown said this trend still remains strong.

“I wouldn’t say it’s to a point where one or the other is going to be dominant, I think they’re both still at a point where they’re growing each aspect of their business while still focusing on their core…But I think financial planners are actively seeking out mortgage broker businesses now or looking to add it to their overall value offering.

"I think we’ll see more and more of this happen over the next three to five years because of compliance. The cost of complying now is becoming far greater and I think people are now starting to realise the cost it takes to comply with the new licensing requirements.

"We saw this as well with the financial planning world when they first brought in licensing, it made it harder and harder for independent businesses to stay independent they had to merge with people in a similar type of trade and consolidate back offices and get economies of scale." 

Growing interest in SMSF products has also been a likely factor in the diversification, said Brown.

SMSF predominantly has a debt focus because of borrowings so generally that’s a service they now need to fulfil. The annuity income that mortgages provide also makes up for some of the annuity income that they’re going to lose going forward for superannuation.”

The fact that mortgage broking clients make for good potential financial planning prospects is a further reason why the move makes good sense for planners, he said.

Brown said this is a trend he expects to continue into the near future, creating overall positive outcomes for the broking industry.

“Whereas in the past financial planners literally just referred [mortgage clients] to a bank, now they’re going to write them themselves. So it’s less business the banks are going to get and more the mortgage broking industry is going to get.

“It’s a really interesting area to watch, especially in the next one to three years we’re going to see a lot of changes which are all for the better. Any improvement in the professionalism in the industry and consolidation in the industry into larger groups only helps lift the image of the industry – so I’m all for it.”


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  • Alistair on 9/01/2014 3:12:30 PM

    So lets understand this a bit. Promoting debt and encouraging people to take more risk is a good thing to make a buck. Even with gearing which is largely a tax lurk than a sound investment method is only as good as the legislation which must change as stated in the Henry Tax Review in order for debt and deficit of a nation to be addressed properly.
    On the other side, the cost of advice is large with red tape also now so large that the government both Federal and State here in Victoria for example has started to focus on the nonsense that is doing business in Australia.
    The only problem here of course is having pandered to the ISN network for their own union oriented agenda and burdening businesses in general they have also fiddled with a financial services industry that is able to assist in reducing the dependence on the Aged Pension system and the issue of the cost of Ageing in Australia. Big cost items to any nation.
    With Australia's population swaying further to the retiree, one wonders how on earth Debt and Deficit will not sink Australia's future in the long term as we all age together and the young much like in Japan leave our shores for an alternative low tax/cost nation. High taxes, and we have among the highest in the world, is not the answer. Neither is over regulation of our industries.
    Government needs to understand that any business is based on Profit driven by Productivity and a Low Tax regime. Fiddle with this and you have a disaster in the making.
    We currently have such a disaster in the making and one wonders whether the new government can steer us in the direction we need.
    After all bad stewardship didn't work for the Titanic - can it work for Australia ? Lets see....

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