The increasing consolidation we’re seeing won’t be good for mum and dad investors, Wealth Within chief analyst Dale Gillham told ifa.
“You see [certain institutions] out there buying up dealer groups, and you’ll be seeing a lot of those [types of acquisitions] and there will be less advisers out there,” Gillham said.
Advisers currently have a lot of “C and D clients” but once Future of Financial Advice (FOFA) changes are implemented, including the RG246 ban on conflicted remuneration, it will make it hard for advisers not to focus on high net worth clients, he added.
“From a point of view of the retail investor, I don’t think they’ll get as much choice anymore and it will pull the industry together into more of a silo, rather than a broader brush,” he said.
Those C and D clients could end up in an industry fund or bank channel environment where groups are set up to offer cheaper, scaled advice, but non-aligned advisers will struggle with the cost of providing advice.
“It’s just about reducing cost base, and the cost of providing advice has been traditionally high because the industry is run by large dealer groups and they really do rape and pillage with their products, with high fees and high commissions,” Gillham said.
“So the adviser’s paying for that but if you make it cheap for the adviser to run their business, their fees are going to come down as well and mum and dad will be able to afford it.”
The industry needs to have the financial planner in control of their own business, more so than in a large dealer group environment, he said.
“We’re in a technology age; technology makes things cheap. If they’ve got the right technology at their fingertips it can reduce their costs dramatically and an adviser will be able to reduce their fees and that’s something that needs to happen.”
ANG – Take your point about a house, albeit somewhat dramatic. Lets looks at the half full version – there is a market for limited advice for A) insurance needs, B) Age Pension planning, C) structure of holding when over 65 in relation to holding a small SMSF, or cashing out, D)Tax implications of overseas pensions and potential to transfer.
One could go on all day, but there are a number of specific situations whereby limited advice can be delivered without a ‘full financial plan’. And there is a need for specialist planners in these areas.
This FP industry is a joke. A circus. It was created from nothing and will now end in tears for everyone but the banks & like companies. What fool would choose this profession? What greater fool would now buy a practice or book?? What a joke!
I am interested if anyone has had a look at the Phone scripts covered in the FOFA regs, i donot know to many Advisors that have a call centre HMM Mr BS. Scaled advisor is like getting a builder to build you a house, but only completes a portion of the house, and you do the rest great if you have the skils & time to complete the rest yourself. My question is if the house falls down who do you sue the builder who did the 1st part or ???.
This article is exactly the way things are…and the way they are intended. Anyone who thinks FOFA was about better outcomes for clients is seriously judgement impaired. Because all I can see is business consultants and lawyers scrambling to offer their services to ensure advisers maintain or increase their revenue. ASIC say they are watching vertical integration like a hawk…I believe they are too, because they want it to happen.
This is precisely what FSC overlords – the banks, want. Labours complete lack of understanding on how business actually works, let alone a certain conflicted Mr BS ensures all advice will be channeled through a select few, and the clients get ripped off again.
The accounting industry is suffering in the same way with the regulatory changes to the auditing standands. It is pushing out small firms who could assist the mum and dad businesses into audit specialists, but I don’t see many new auditors being trained up to take on such draconian laws. So I fear the same will be felt in the accounting/auditing sector and then mums and dads are the ones having to pay all over again.