Non-aligned planners growing off back of third party services
The number of independent licensees will continue to rise as planners use technology to move out from under the restrictive nature of the Future of Financial Advice (FOFA) reforms and away from relying on institutions to provide investment and asset allocation tools.
According to Hub 24 managing director Andrew Alcock and head of marketing and distribution Wes Gillett there has been an increase in planners and practices seeking third party investment and dealer services since the introduction of FOFA as a way to move out from under an institutional licence.
Alcock said that FOFA had stifled the non-aligned model and had shut down revenue streams based on investments which had forced some planners to consider joining institutions to maintain revenue streams.
However technology was allowing planners to set up their own model portfolios and managed accounts and offer clients bespoke investments and charge for both the investment and financial planning advice components.
“In the past there were two fee streams planners relied on – advice and product. However FOFA killed product fees but the current technology solutions allows planners to revive that area and is allowing financial planners to act like fund managers and build their own systems,” Alcock said.
“This is driving the push for ‘independence’ because planners can create their own funds, charge fees for them and do so without having to be aligned to any institution.”
Gillett said planners were looking for the freedom to ‘take their own bets’ and were limited by institutional platforms and investment tools with Alcock stating that traditional strategic asset allocations was a model that served the compliance needs of licensees but not the investment goals of planner clients.
“The distribution model has driven the product model and this is now beginning to lead to polarisation in the advice market where planners are part of an open system or part of a closed system,” Gillett said.
“Institutions may have headcount and resources and the FOFA compliance fear has driven some of their growth but true entrepreneurs, even within those groups, will want to run their own show and with the growth of technology will move out and do so.”
AUTHOR
Jason Spits
Recommended for you
Two commentators have shared why cultural alignment can be the biggest deal breaker when it comes to advice M&A and how to ensure a successful fit.
With an abundance of private market options coming to market, due diligence becomes increasingly important as advisers separate the wheat from the chaff, adviser Charlie Viola has said.
The Treasury has launched a consultation into how the $47 million special levy for the Compensation Scheme of Last Resort will be funded.
With the final tally for FY25 now confirmed, how many advisers left during the financial year and how does it compare to the previous year?
