Shift to institutions diminishes adviser value

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Non-aligned financial planners who joined institutions in the lead-up to the introduction of recent reforms made value-destroying choices and would regret the decision, according to the head of a boutique planning practice. 

Treysta head of wealth management Mark Nagle said the recent introduction of the Future of Financial Advice (FOFA) reforms was an opportunity to move their business forward that many practices had missed. 

“Prior to FOFA Australian Financial Services Licence (AFSL) applications dropped off as some planners moved into institutions while some stood on the sidelines waiting to see what would take place,” Nagle said. 

“AFSL applications have returned to normal levels as those who stood on the sidelines have discovered they can work in the new regulatory environment and even compete in it with larger players.” 

Nagle, who with Treysta is seeking to move out from under partial ownership of AMP and into their own licence, has recently returned from a study tour in the United States conducted by State Street Global Advisers. 

He found that the growth of independent advice was outstripping that of institutions as consumers moved away from seeing financial planners as asset managers to asset strategists, a trend which was gathering pace in Australia as well. 

“Australia is not miles behind the United States, it just needs to redefine the playing fields and provide a stronger voice for independent advice,” Nagle said. 

Implemented Portfolios managing director Santi Burridge, who was also part of the tour, said the independent advice model in the United States was growing with nearly a quarter of planners not aligned with an institution. 

Burridge also stated that these advisers held 36 per cent of assets under advice in the United States, and the sector had grown by 13 per cent at the expense of banks and other advice institutions. 

He said the reason for the shift was that non-aligned planners in the United States had shifted from being asset managers to asset strategists for clients, and had moved from spending a majority of their time picking stocks and funds to spending time with clients. 

“The flow-on effect for Australia is asking planners if they are brilliant at investment management or with building strategies and client relationships,” Burridge said.

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