Ann: Intiger Market Update, page-762

This recent article popped up on a site I'm just reading through atm and thought may interest holders. Whilst it is primarily about a new business set up to assist planners become independent, the interesting bit is the numbers moving away from the vertically integrated model of the Banks & AMP in particular.

Whilst may or may not impact IAM chances of ever securing a major player (and jury still out on that for time being imo), it could also potentially open the door a little more to capture a larger number of individual planners that strike out themselves & seeking potential cost efficiency gains.

Why independent AFSLs are becoming more important

Published by  Greg Bright at November 1, 2017

• Date November 1, 2017

This column has written a lot about what the Future of Financial Advice really means, how individual advisers are coping and what they need to do to cope in the future.

The column has also been critical of the licensing system and it has tried to give genuine advice to advisers who may be bamboozled by the complexities attached to going out on their own.

This week we present a slightly alternative view, from the partners in a new business: well-known founder of Fortnum Financial dealer group, Ray Miles, and former executive general manager of trustee and wealth services at Equity Trustees, Geoff Rimmer.

Their business is called Green Zone, after the safe place soldiers and others have in war zones. It’s “conflict free”.

The business is designed as a “hub for independent financial advisory businesses”. It’s first major activity will be to host what is billed as “Australia’s First AFSL Masterclass”, on November 16-17 at the University of NSW in Sydney.

According to Miles, the biggest trend in the marketplace is for planners to get their own AFSL. He estimates the cost of getting you own licence as between $50,000-80,000. Then, with technology such as X-Plan, PI insurance and compliance costs, it costs probably $150,000 a year.

Whether or not you agree with their numbers, Green Zone aims to assist planners to get an AFSL at a reasonable price and be able to maintain it, also at a reasonable price.

And whether or not you agree with their numbers, it’s difficult to argue with their view that the vertically integrated model of advice – being linked to banks, big fund managers or other investment product providers – is breaking down.

According to a recent Bell Potter market review, they say, 400 advisers have departed the vertically integrated systems of the four banks and AMP in the first six months of this year. The emerging trend away from the vertically integrated model is already over 10 per cent annually.

With an expected increase in the number of planners exiting the industry rather than submit to the new qualification standards coming in next year, Green Zone believes more than 3,000 advisers will be leaving the vertically integrated system by 2020.
“It is clear that the vertically integrated dealer group model for independently owned advice practices is coming to an end,” Miles and Rimmer say in a recent paper. They quote CoreData research: “Consumers, too, have had enough… Ethical standing now eclipses years of experience in terms of their expectations from their adviser.”

According to Miles and Rimmer, there is about 100bps a year difference to a client in the advice provided by a “conflicted” adviser and a “non-conflicted” one. “Clients are paying through the neck,” Miles says.

*Greg Bright is editor of New Investor. This column is normally written by Ian Knox, managing director of Paragem, who returned yesterday from a business trip to the US. He is also an expert in the provision of AFSLs.