Would small IFAs be better off on salary?

The days of small independent financial advisers (IFAs) turning over less than $250,000 may be numbered with dealer group authorised representative costs rising in the face of increased regulation and associated overheads.

That is the assessment of former dealer group head, Paul Harding-Davis who said that many smaller IFAs with relatively low turnovers might be better off becoming salaried advisers from both a financial and risk perspective.

Harding-Davis’s comments came amid reports that a number of dealer groups were signalling that authorised representative costs would be rising to as high $80,000 a year to cover increasing regulatory compliance costs, professional indemnity (PI) insurance and access to planning software such as X-plan.

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He said that while some dealer groups were already charging as much as $80,000 a year, he believed that costs around $65,000 were more common.

However, material developed by Viridian after it acquired much of the Westpac planning business pointed to a practice fee of $48,000 a year, together with an authorised representative fee of $22,000 a year for the first to authorised representatives and $15,000 a year for each subsequent authorised representative.

The Veridian material suggested that this meant that a financial planning practice with four authorised representatives would be paying a total of around $122,000 a year.

However discussion of the rising authorised representative costs have come at the same time as the Commonwealth Bank has confirmed a round of adviser and advice-related redundancies within Commonwealth Financial Planning.

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Employed by who some super fund? Have sales targets? Isnt $250,000 enough for one person to write and make? There are many like me with under 300K turnover , yes we pay about $50,000 a year in fees, but maybe we are happy to just make enough to pay the mortgage and so forth whilst we build a business. Stop scaring people with this dealership fees may increase blah blah, its all guesswork and causes stress to people. Small businesses like me are nimble, we can move and change fees structures and so forth at a drop of a hat, we offer the best service available to clients as we are always there and know how to really value relationships. The reason we are in this mess is big salaried sales forces. We need to move away from that.

Heaps of money to be made working for a "Not for Profit" fund charging all members a fee to provide Intra Fund Advice "In the Best interest of the Members" it seems.

Yeah best to join AMP and or stick to the large and mid tier licensees....not. Ah the desperation of a failing business model since grandfathered commissions were turned off. Would the last planner, that works for these licensee's ....please turn off the lights as they leave, so that we can all become self licensed and we can all finally become a profession. Or wait you could stay and keep paying for compliance support that never return your calls and keep paying for all those layers of management. These licensee's are good for start up's, advisers retiring in 3 years and those wanting to do aggressive advice strategies. I saved so much money in dealer group fees I went out and hired another staff member. My compliance is actually better and my support is actually greater.

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