Mid-tier planning sector relationship stretched by FOFA
The relationship between licensees, advisers and platforms has stretched since the introduction of the Future of Financial Advice (FOFA) legislation leading to more planners departing the mid-tier financial planning space and setting up under their own licences according to SFG Alliance head Dan Powell.
According to Powell FOFA has pushed apart the connections between licensees, advisers and platforms and exposed the relationships between the three which some advisers are calling into question, particularly in the mid-tier advice space.
Powell said pricing changes in the mid-tier space would put pressure on revenue splits with advisers requesting more revenue for their work, which would force them to look at other mid-tier groups or to gaining their own licence if it was not forthcoming.
He said while advisers were leaving large institutionally aligned planning groups that part of the advice sector was not under threat and would endure, as would the small end of the market, while mid-tier groups could face uncertainty about retaining self-employed advisers under their licenses.
"Vertically integrated planning groups will survive because they are built as part of a long-term model and the banks are a good home for wealth management style businesses, as long as they have good systems in place," Powell said.
"Small licensees, those called ‘single office AFSLs', also have a strong future because they are close to the client and have a low-cost structure. The question is how will the middle market survive and what will that model look like?"
Powell said that in the past planners joined large and mid-scale advice groups for the scale of the groups and their platforms and the benefits derived from those but were now moving away and seeking to control their own direction and the service model on offer to clients.
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