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Are the days of the dealer group numbered?

The financial planning dealer group model has probably passed its use-by date and dealer groups should look to major legal firms for the type of commercial model that will help them move ahead, according to ClearView managing director, Simon Swanson.

Speaking to Money Management, Swanson said that he believed the common dealer group model represented a “false construct” in the context of the changes which had occurred in the financial services industry over the past decade, including the Future of Financial Advice (FoFA) changes, the Life Insurance Framework (LIF) and the Financial Adviser Standards and Ethics Authority (FASEA) regime.

Swanson also pointed to the position that groups such as the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) would likely adopt as code-monitoring bodies under the auspices of the Australian Securities and Investments Commission (ASIC) and FASEA.

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He said he personally believed that increasing numbers of planning firms would become self-licensed under the new regime, therefore carrying responsibility for their own professionalism and regulatory interactions.

Swanson said that, in such circumstances, he believed it was likely that the future of dealer groups lay in adopting the same model as major law firms within which individual lawyers were responsible for maintaining their own professional standards and licensing but gained the advantage of working under a large commercial umbrella.

“Dealer groups were a reflection of the industry as it used to be, but I believe they are struggling to remain both relevant and commercially viable in the current environment,” he said.




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Interesting thought. Ive been involved with three dealer groups over 18 years and see them as a necessary evil. They can be good, but can also get caught up in conflicts of interest particularly involving distribution of their own linked products. Favouring in house products over others and using compliance guidelines to push advisors to use in-house products by making compliance much more onerous if you use other products.

Interesting observation. Would the recent changes to rules, education, client focus, etc now stop the favouring of in-house products over best interest of clients?

I don't know Hedware, but as you have always been a fervent supporter of Industry Super Funds, imagine the impact on these organisations of having to meet best interest duty when they are simply a vertically integrated model designed only to build FUM within their own product.

Agent 86 - please get it into your head that I have nothing to do with any industry fund. But I do with retail funds and selfishly I want them to do better for less and with honesty. I am a capitalist and want competition in the marketplace. You might argue that there are plenty of retail funds that bring in competition, but then most are owned by a few companies and most are simply followers. The industry funds bring in disturbance and upset the retail funds' cosy way of doing business.

You are being your usual hypocritical self by ignoring the very integrated vertical model of banks and their wealth management businesses (as well as others).

We are living in a parallel universe, Industry Super operates under a totally different regime interconnected with, and 100% supported by one of our two main political parties. Sounds like something you would expect out of China or Russia.

I agree with sentiment of this article. Dealer Groups by and large create an economic dead-weight loss. The major challenge is the lack of unified professional body and a regulator completely unequipped to regulate. The PI insurers would need to be supportive

Good point. Do you think Swanson's line of argument and suggestion stacks up?

I obtained my own AFSL licence in 2017. No regrets. Any adviser worth their salt should do the same. With BID obligations and FoFA the risk is all on the adviser and not the dealer group. My advice is run out now before ASIC application fees go up or contact the adviser up the road and form a hub. After close to 20 years of being in dealer group land belonging to various licensees the traditional licensee model is broken. My costs are down, my compliance support is three times as good. I'm a sole operator and the cost savings allowed me to employ another admin staff.

Dealer group land is only for advisers retiring within the next 5 years, young start up advisers and finally those advisers unable to get their own AFSL or change dealer groups because they're doing high risk strategies which drive up PI Costs. What you're left with in that model is quickly looking like the dregs of the advice community and think about that in relation to your compliance red tape.

Folks, there is another option.
Independently owned dealer groups with the advisers owning a share of the Licence, is an alternative.
So long as it's run like a co-operative where everyone has a say and their opinions are valued,... works.
There are synergies to be gained from this model, with economies of scale in relation to operating costs the obvious advantage.
What some of you need to find is one that is a cultural fit, that offers a group with healthy ego's that enhances the Licence and doesn't inhibit the Dealer group or their advisers
We operate as a group with the added advantage of tapping into areas used by some of our advisers that others have little exposure to. It's a great resource when you have that advantage.
Owning your own Licence certainly will give you independence and autonomy but there is much more to be gained if you are associated with like minded individuals that form a collective.

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