Speaking to ifa, Praemium head of distribution Martin Morris said the major financial institutions are not keeping pace with trends in the post-FOFA environment and burgeoning IFA movement.
“I think the new environment is going to be difficult for them – they have been set up as businesses for the world of tied distribution,” Mr Morris said.
“I think they need to decide whether they are going to develop products truly suited to the IFA market or open up and allow other service providers to reach their networks. They are still transitioning and I think struggling with that decision.”
Despite lip service being paid to ‘open architecture’ and broad APLs at the institutions, many are still hesitant to open up their financial advice networks to third-party technology and investment product providers.
“We’re still not talking to the large AFSLs,” he explained. “They are still controlling their advisers, they are still badging their own PDSs, they are still badging their own models, so there hasn’t been a change in the way they interact.”
Mr Morris said it was still “virtually impossible” for advisers with some large institutionally-owned licensees to use a Praemium platform, for example, though said it was increasingly possible to strike a relationship with a large and influential practice within an institutional network and “push for an exception”.
The distribution strategist also criticised some of the so-called SMA offerings introduced by the institutional platform providers.
“The institutions may introduce ‘managed accounts’ as an opportunity, but they still control the process and it still sits on old technology,” he said.
The comments come as 75 per cent of respondents to an ifa straw poll indicated they believe the independent financial adviser market will outnumber the institutionally-aligned market in the future, with 50.3 per cent anticipating the shift to occur within two years.
The banks / tied distribution follow like sheep the entrepreneurial developments of the non aligned / independent business owners.
I can not predict time frame, but the market is moving quickly away from the institutions whose reputations are in tatters with the Australian constituents.
It really is worth listening to providers, consultants and advisers who are working in the UK market and working out what the lessons could be for the Australian market – Praemium has struggled to get a foothold in the UK because the SMA concept is unusual / unique on the other side of the world and advisers are nervoud about adopting it within their businesses – but tied distribution is dead in the water – and Martin’s main argument is right – either create better in house products or open access to others – or go Independent 😉