Non-institutionally owned dealer group Professional Investment Services (PIS) is gearing up to make a play in the cash-management space.
The group is seeking new revenue streams in the wake of the impact of recent market falls on investment inflows and in preparation for impending changes to remuneration practices for its advice business.
PIS chief executive Robbie Bennetts confirmed the group had signed a joint venture agreement with a banking licensee, which Bennetts would not name. Money Management understands the licensee to be Credit Union Australia.
Profits from the joint venture would be retained at the licensee level. PIS advisers who write business in the products would be remunerated by the joint venture holding company, Bennetts said.
Bennetts expects to launch a cash management account in the coming weeks, followed by term deposits.
“There’s a lot of people out there not happy with the banks,” Bennetts said.
“They have created an opportunity for us to compete.”
PIS advisers currently write business into a number of cash management trusts and accounts offered by the big-name institutions. Bennetts said he expected the group’s play in the cash management space was likely to draw criticism from the banks, but that the move by a financial services licensee into this field would revolutionise the advice industry, particularly where non-institutionally aligned businesses were concerned.
“Yes, we will take on the banks in the fixed interest space,” Bennetts said, describing the model as the way for dealer groups to survive and compete in the future.
Bennetts said changes to the remuneration practices in the financial advice space would make it extremely difficult for non-institutionally owned, large-scale licensees to remain adequately profitable.
Over the past 12 months the group has been indicating it would need to share in the profits made through product provision to allow for the potential removal of volume rebates at a licensee level.
PIS, like many dealer groups, saw a dramatic fall in revenue through the crisis as a result of reduced investment inflows. Speaking at the PIS annual conference yesterday, Bennetts pointed to investors’ rush to cash during the crisis.
Bennetts said adherence to the incoming guidelines around remuneration, namely the removal of adviser commissions and licensee volume bonuses, would see the group’s revenue fall by around 90 per cent.
“We have to change. We can’t keep repeating the same model.”
