Independently owned firms take on the big boys

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Peter Johnston of the AIOFP has announced that the association is considering implementing a vertically integrated model for independently owned planning firms. The model will be like those the big banks have, but advisers will have access to six different administration platforms and around 150 different investment products.

Johnston says the Independent Vertically Integrated (IVI) model will give independents a chance against the bigger players in the industry. “Institutions, Industry Funds and SMSF promoters are permitted to cross subsidise advice with platform/administration revenue whilst independents are supposed to survive on a pure business model in a market where consumers are not accustomed to paying for advice. No one can make advice profitable, however, independents are expected to.”

The IVI will use Mercer and FRC independent research. Participants will be independent practices with their own AFSL and ideally members of the AIOFP, says Johnston. PCM will be the quasi product manufacturer, owned by the IVI participants, which structures the administration platforms and delivers either revenue to the practice, or delivers services such as compliance, training and research in the same way the traditional VI models operate.

“The key difference to the traditional VI model is the 6 different administration services will be under Private Label conditions where the institutions are used for the administration/custodial role but the structure/clients/FUA is owned by the advisers,” says Johnston.

CFP Paul Levy said it was about time that advisers formed a unified front, and that the IVI would be advantageous in terms of enhanced lobbying potential and a better platform on which to keep advisers better informed.

He said the take up could be slightly lower than it should be, due to adviser apathy, but he can’t see a down-side to the process. Independent adviser Matthew Ross isn’t so sure however: “If there’s something to do with the bank model, there’s probably something wrong with it. I don’t know if we should be copying the banks.”

Do you think the IVI will create more competition and an even playing field?