Institutional advice model facing rapid demise
Advisers are expected to exit institutions en masse in 2015, with the product-heavy vertically integrated model facing an "adapt or die" future under the new advice regime.
The forecast came courtesy of Connect Financial Service Brokers CEO Paul Tynan, who said he has never received more enquiries from advisers wanting to detach from the vertically integrated model, many of whom want to set up their own Australian Financial Services Licence (AFSL).
He said tension between financial advice and product selling has characterised the last 12 months and will culminate in advisers evacuating institutions at a rapid pace, a trend which could climax in 2015.
Tynan blames the institutional advice model for much of the advice sector's perception problems and says it is not surprising that there is such a move away from it.
He said in 2015, the model will be the subject of "intense attention" and stressed the product-heavy formulas may not last as the Future of Financial Advice (FOFA) best interest duties become the core of advisers' offerings, at both independent and institutional levels.
"Some institutions are still standing by their buyer of last resort (BOLR) structures but they will not be able to survive in the new environment that demands always working in the best interest of the consumer / client," he said.
"The industry has had enough of product providers lecturing the advice profession on what is best practice especially when the majority of the recent high profile disasters such as Storm, etc have been associated with a major institution," he said.
"These disasters and their links to product providers has shaken and tarnished the industry's reputation and it's no wonder there is such deep cynicism and lack of trust by consumers."
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