Dealer groups are preparing for changes in the financial services industry by looking to platform and fund ownership as a way to take planner and licensee remuneration into their own hands.
With commission payments to advisers and volume rebates at a licensee level under close scrutiny, independently-owned dealer groups are examining potential new remuneration structures. A number of such dealer groups are now looking at becoming responsible entities for investment platforms and fund-of-funds products, while outsourcing investment management and administration.
Listed dealer group Snowball currently offers fund-of-funds model portfolios to its advisers in Western Pacific Financial Group and Outlook Financial Solutions. The group receives some volume rebates through this model.
Snowball chief operating officer Carl Scarcella told Money Management the group was now “actively involved” in exploring ways it could restructure its existing arrangements, but would not provide further details.
Count Financial chairman Barry Lambert said if the legislative and regulatory environment altered the commercial arrangements around platforms, large dealer groups would be best positioned for a restructure.
Count has a longstanding relationship with BT through its wealth e-account, for which Count receives a rebate. Lambert said if required, it would be possible for Count to take ownership of wealth e-account and name BT as the outsourcing agent.
Professional Investment Services (PIS) managing director Grahame Evans said in a world without volume rebates, dealer groups must operate as funds management businesses, rather than simply advice businesses.
Evans said in creating such a model within PIS, the group would “look to negotiate a fee with [product] providers and then charge a market fee for the product”. Evans said the group could “strike relationships with wholesale fund managers at reasonably competitive prices, which would allow us to put our margin on top for [PIS-owned fund-of-funds business] All Star”.
Evans said while future ownership of funds management products by dealer groups is important, so is managing any conflicts of interest around that.
Some industry participants, such as Brisbane-based financial planner Bruce Baker, argued that in order to combat conflicts of interest, no organisation should be able to both advise on and manufacture financial products.
Meanwhile, Snowball’s Scarcella is somewhat critical of groups that he believes are simply looking to disguise volume rebates by changing the flow of money.
“Ultimately, what the regulators are looking for and what our industry needs is a real good look at unbundling all of our services and paying the right prices for the right components of that, without any loading up of commissions or rebates,” Scarcella said.
