There is no future for dealer groups that focus purely on risk — but there is a good future for individual risk advisers, says Wes McMaster.
According to research undertaken by McMaster in his role as adjunct professor at RMIT, only 47 per cent of financial planners also handle risk advice. He argues this shows there is a big future for risk advisers.
“I don’t think there is a future for pure risk dealer groups, as they would want to make a strategic decision of not sharing clients with financial planning firms,” McMaster says.
“For them the danger is the planner will provide not only financial planning advice, but also risk, and they would lose their client.”
The argument then is that individual advisers can provide these services to financial planning firms.
“If half the financial planning industry is not dealing with risk, then there is a big market for risk advisers, as clients have to be advised on all aspects of their financial needs,” he says.
Zurich Financial Servicesstrategic marketing manager Marc Fabris believes there is a future for risk dealer groups that form alliances with other financial planners or accountants.
“It will probably be the smaller risk dealer groups [that are] more likely to survive,” he says.
“They have a place, as long as they focus in the right areas. The larger groups have become more general financial planners with less focus on risk.”
Fabris says what usually happens is risk advisers tend to form alliances with other risk advisers. However, some dealer groups like PIS have formed successful cross-alliances between risk advisers and planners and accountants.
There have also been casualties, withAXAclosing down Altus this year. This dealer group was formed as a purely risk adviser operation, but didn’t achieve the profitability or the adviser numbers.
McMaster says it is common for dealer principals to say risk is too difficult.
“Risk advice is not difficult and to say it is too complicated is a fallacy,” he says. “The dealer groups probably did risk at some time but the focus has moved to financial planning. They need to refocus as risk is not rocket science.”
Fabris also says dealer groups should not be excluding risk skills.
“A dealer group should be catering for different professional development needs of its planners,” he says.
There are benefits of having risk advisers within a group, which opens up potential opportunities to cross-sell to clients.
“Using internal alliances within the dealer group is better than going outside the group,” Fabris says. “It is better to facilitate alliances within the group, as this allows the business to cross-grow.”
Successful risk dealer groups will be those that run as a family, he says.
“If they care about their advisers, it has been proven they will be a survivor.”
