Annick Donat, chief executive of the Clime-owned Madison Financial Group, said while many MLC practices were “arguing the toss on price” when deciding whether to stay with IOOF or move to a non-aligned dealer group, this was ultimately a positive for the industry as it meant advisers were “back in the driver’s seat” when it came to running their business.
“I’ve had those conversations [with advisers] and I take a breath and think it’s about time,” Ms Donat said.
“It’s about time the adviser realised they are in the power seat – they’ve realised the only important relationship is between them and their client because frankly it hasn’t been that way for a long time.”
The comments come following recent remarks by Sequoia Financial Group managing director Garry Crole that outgoing MLC advisers were choosing to stay with IOOF for the most part because of “uncommercial” fee reductions being offered by the institution.
However, Ms Donat defended the advisers’ decision to put costs first in choosing a new dealer group, pointing to the onslaught of new industry regulation that was set to continue in 2021 at the same time as licensees sought to remove cross-subsidisation of their business costs.
“These people are struggling to deliver advice and make a profit in some circumstances – with the amount of regulatory burden in the industry at the moment, everyone talks about it but I don’t think many people really understand it,” she said.
“If you just take the DDO bill and the fee consent and work out what the legislation actually says and how to execute and meet that need, it’s complex. You are going to need systems and processes and to understand the legislation and whether it’s the licensee charging you or you charging your client, it all costs money.
“When advisers are negotiating fees it’s because they’ve had COVID to deal with, the costs of advice has increased, they’re worried about not having enough resources to pay staff and it’s about time they got a bit of their power back.”
With many practices currently making a forced exit from MLC and other institutions, Ms Donat said cultural fit was a more important component for Madison when choosing which advisers to bring on board.
“I don’t have an issue with negotiating on price, because if it’s about price and you don’t deliver value you don’t deserve the client anyway. What really is important is if you don’t want to be part of something,” she said.
“We won’t have someone in our community that doesn’t want to be part of something. We’ve missed out on a few [advisers] but the one thing that’s always come back is you can tell we’re adviser led, we believe in advice. It’s a respectful relationship and we want to build something together.”
There is only one option that puts advisers in the drivers seat… self licensing.
MLC/IOOF/Madison/Lifespan/Fortnum/CentrePoint/AMP are all minor variations on the same theme. Being licensed by any of these dealer groups involves ceding control to an organisation that can squash you like a bug if you don’t sell enough of their inhouse product. These days it’s not worth the risk. Don’t believe the dealer group hype or their scare stories about self licensing.
Many of these aligned advisers need to start putting their clients, industry and their peers first. Some ridiculously high number of advisers hitched their wagon to large insto’s and are wondering why they got FASEA’d. They get business coaching from a company whose profit model is all about FUM and then scratch there heads at a Royal Commission and wonder why Treasury doesn’t listen to them and the FPA looks only after the Insto’s and we’re all buried in red tape. Perhaps if they put clients and peers first, and their hip pocket second, perhaps we’ll all do good financially over time and all our businesses will grow.
Advisers have always been in the drivers seat. There is a number of factors that come into any decision when choosing a dealer group or running your own AFSL. This is a nice little plug for Maddison
Madison would take any adviser that can “fog a mirror” – look at their record! Not sure Madison’s opinion counts!
There should clearly be more female CEO’s of advice licensees if Ms Donat is anything to go by. Candid, for advice, understanding of reality etc. Price is an important factor although not the only factor.
Bear in mind that many advisers transitioning to IOOF will only do so whilst they work on the longer term plan. The move will be easy and cheap with minimal business interruption, almost a drag and drop.
These advisers will then make a more considered decision without the pressure of a forced move to somewhere that isn’t right.
ex BT/Westpac/Securitor
I suspect all/most AFSL holders are underpricing their offering on the basis of under/not correctly pricing the advice risk they are wearing. If that is true, the IOOF “bargain” price offering must be a loss leader…but to what end? I’ll leave that to you to decide…
Licensing fee inertia is the driver here, not FUM as many of the tin hats are suggesting.
The cost of advice has been an ongoing discussion for the last twenty years.
Pricing concessions provided to the adviser by the licensee help to kee the cost of advice within reason.
Price, culture and approriate services to improve efficiency are key.
and ensuring that compliance is at the top of the list as well. Compliant and profitable businesses go hand in hand. Cannot have one without the other you know. Really do not feel that this person has any idea as their business is the worst when it comes to compliance and compliants.
Good to see Clime owned Madison are prepared to reduce fees to support advisers in this challenging time.