Institutional dealer group model confusing clients about value of advice

The intrinsically flawed value proposition of institutional dealer groups has left a generation of clients confused about the value of financial advice, according to Justin Hooper, managing director of Sentinel Wealth Management.

Hooper said the boutique firm is engaging an increasing number of clients from institutions who have been left thoroughly confused by their experiences at institutional dealer groups about the value advisers bring.

“These new clients tell us they weren’t understood by their previous advisers, whereas, on closer observation, it is clear they’ve been left confused by an intrinsically flawed institutional advice model.

“They’ve always thought advice was about generating additional money, but now, due to the impact of the global financial crisis on their portfolios, they’re beginning to understand that advice is actually about generating additional wealth."

Hooper said there was so much money around prior to the global financial crisis that this distinction between generating money and wealth was lost, but it is now re-emerging in the sector.

He said, however, that the institutional model is incapable of adapting to a true wealth-generating model because at the end of the day, it still has to sell specific products.

“When the institutions talk about client engagement and care for the client in reality they are thinking of it only as a sales tool.

“They’re asking themselves how they can use this concept as a technique to sell more of our products.”