Badged platforms not a FOFA panacea

Mid-tier dealer groups will have to go beyond simply launching badged platforms, which are not necessarily the Future of Financial Advice (FOFA) panacea some were hoping for, according to Snowball Group managing director Tony McDonald (pictured).

The proposed FOFA reforms, especially the proposed ban on volume rebates, have led non-institutionally aligned financial planning groups to consider developing their own white label or ‘private label’ platforms. Last week a number of dealer group members of the Association of Independently Owned Financial Planners (AIOFP) banded together and launched a private label platform through Asgard. AIOFP chief executive Peter Johnson was not able to comment at the time of going to print, but Money Management understands that the association’s arrangement with Asgard enables it to negotiate significant cost savings while securing greater control of the platform.

Snowball Group has long-term experience in this area and in its early days developed its own cheaper platform. However, that was a difficult and costly route, said McDonald, “because every now and again you need a fair bit of money to invest in systems”. Snowball ended up closing down the platform and entering into a badged platform arrangement with Asgard, and from there it was able to drive down costs. However, in light of legislative change and changing consumer expectations, Snowball has sought greater control through a strategic portfolio administration partnership with Colonial First State, simultaneously acquiring the revenue rights of its Synergy Portfolio Service.

“There are some limitations to badges,” said McDonald. “Badges are effectively just a badge of an existing platform that is available to everyone in the market, and therefore it’s difficult to bespoke and tailor the platform to your own needs and customer base because it’s effectively a popular offering.

“We think a lot has changed in consumer land and the way consumers approach advice is a lot different,” he added. “We took the view that we needed to be more front-and-centre in terms of being able to work with a platform to make changes that were unique to us.”

McDonald explained that this shift was driven by the need to bring costs down, and give clients more flexibility, transparency and access to direct equities (the latter achieved through the development of a model portfolio that Snowball is set to launch).

“We are able to do that because we have control over the Symetry platform, so we can build things specifically for us,” he said.

McDonald said dealer groups going down the white or private label platform route needed to ensure that they were in a position of control of the service experience and pricing for their customers so that the dealer group could be “absolutely product-neutral, the advice isn’t distorted and you can actually deliver on the promise to the consumer at the right price”.