Dealer groups, platforms consider new models
The reforms to the financial advice industry proposed by the Government last week were clear about the changes required for financial planner remuneration, but reforms to the commercial arrangements between investment platforms and dealer groups remain clouded.
While some major platform providers, as well as the Investment and Financial Services Association, remained quiet on the topic, some made clear more clarity was required to determine which payment structures would survive in the new world.
Under the proposed reforms, volume bonuses and fee rebates from product providers to licensees based on funds under management would not be permitted, nor would volume-based shelf-space fee payments between fund managers, platforms and licensees. Shelf-space fees, including ‘product access payments’, would be permitted if they were not based on volume.
In anticipating the reforms, some dealer groups, including Count Financial, suggested the removal of volume rebates could be overcome by dealer groups taking ownership of platforms while naming an administrator or fund manager as the outsourced agent.
In this situation, while the flow of fees would be reversed, the management of the platform and the commercial benefit received by dealer groups might remain largely unaltered. This would likely see platform providers expanding their existing white label offerings, a corner of the market that is now dominated by BT Financial Group. But many are scratching their heads as to how these deals would be structured, with some dealer groups suggesting platforms pay a shelf-space fee to be included on an Approved Product List.
Professional Investment Services (PIS) managing director Grahame Evans envisaged the number of platforms offered by the group would reduce if the proposed reforms are introduced.
"I can see the number of platforms that we offer to clients reducing dramatically to the ones we actually own," Evans said.
PIS owns two platforms, Mentor, run by Oasis, and Investment Exchange, offered by Colonial First State Custom Solutions. The group also has a white label offering with Navigator, Diversified Portfolio Managers.
PIS’ most strongly supported platform is Navigator, which was acquired by the National Australia Bank (NAB) as part of its acquisition of Aviva last year. Evans said the group would not stop supporting Navigator in the event volume rebates were removed, but might transition to their own version of the product.
"We have a Navigator product that we own. Not knowing exactly what the conditions will be in respect to this, I’m only hypothesising, but that could be one vehicle that we could use that mirrors Navigator," Evans said.
PIS also supports the BT and Colonial First State platforms.
AUTHOR
By Beaman
Recommended for you
It can be extremely hard to realise the gains from financial advice M&A, according to Peloton Partners’ Rob Jones, and more could be gained from firms looking inward at their own practice.
With platforms reporting their quarterly results, there is a clear divide in the adviser markets they are targeting, according to platform specialist Recep Peker, and which would be right for your clients.
The Federal Court has imposed a $10 million penalty on Macquarie Bank for failing to prevent and control unauthorised fee transactions by third parties including financial advisers.
A financial advice firm has seen a weekly decline of 10 advisers, with all moving to a new licensee, while Centrepoint Alliance continues its “growth story”.
