Call for Government inquiry into inbuilt margins in badged platforms

Current Government inquiries into adviser remuneration should be broadened to include adviser inbuilt margins from badged platforms, according to Michael Heine, managing director of independently owned platform Netwealth.

“There’s a lot of industry comment on adviser rebates from platforms, but an equally concerning issue should be that there are a large number of badges that benefit from these inbuilt margins,” Heine said.

Some advice firms and dealer groups choose to have badges “partly for image, partly for corporate profile, but very substantially for the margins a planner or dealer group can obtain out of the platform”, he said.

“They see the platform as an important source of revenue, which in some cases equals as much as they receive from the financial planning itself.

“It is therefore very important that those margins in a badged platform be disclosed clearly to a client and that a client be given the option to participate or not,” Heine said.

In addition, he said these inbuilt margins are “obviously something very highly considered in terms of building planning practices and dealer groups for sale”.

“That’s because they’re selling the advice once and selling the FUM once, and so actually getting two bites of the cherry.”