Planners hold balance of power in industry

A growing number of financial planners are ordering dealer groups to sign restraint of trade agreements to protect their client bases and opting not to sign-up with groups that attempt to restrain them, a leading industry lawyer claims.

Speaking at last week’sResnikStrategic Wealth Management forum, Sydney-based lawyer Peter Townsend threw more fuel on the ‘who owns the client’ fire when he told delegates that advisers are in effect saying: ‘I’ll come on board but I’ll keep my clients.’

“Planners are now refusing to join dealer groups that restrain them, and some are actually demanding restraints of trade from the dealer groups,” he said.

Townsend revealed if planners truly understood they hold the balance of power in financial services they could make life very difficult for dealer groups.

However, Townsend stressed, in order for planners to maximise their bargaining position they must add value as clients become more savvy. This will strengthen their relationship with clients and give planners the power to make the licensee serve them, rather than vice versa.

Townsend was critical of dealer groups that force planners to sign restraint of trade agreements, saying they misunderstood the nature of the relationship with their authorised representatives.

“Licensees fail to understand that their client is the planner and they should be fostering that relationship,” he said.

“The roles of the authorised representative and the licensee are different and the licensee should support the planner — keep the planner happy so the planner stays with the organisation. It’s a win, win synergy.”

Townsend also called for a ‘planner-only’ organisation that would help safeguard planners’ access to their clients.

“[The FPA] is an umbrella organisation. It does not champion the planner’s right to own the client,” he said.

“This is not being critical of theFPA. But [this is one] of the things a planner-only association would focus on if it were not an umbrella association.”