Consolidation signals end of independence

The number of truly non-aligned groups that are still well-established with a strong track record “is now so small I can count them on two hands and have fingers left over,” she said.

Although advisers who come to use the Pinnacle adviser matchmaking service still want a new dealer group that is independent from institutional influence “that part of the market is shrinking at an alarming rate of knots,” she said.

Many non-aligned dealer groups have institutional ties via wraps and platforms, with institutions increasingly taking strategic shareholdings in boutique groups that are running independent style models in order to attract more advisers into their dealer groups, Fuchs said.

Advisers also don’t seem to fully grasp the ownership structure and commercial realities of non-institutional licensee businesses. “They need to understand what it costs to run a dealer group and the impact of FOFA (Future of Financial Advice reforms) and conflicted remuneration legislation on commercial terms,” she said.

“There is an absolute mismatch between what advisers want, what they think is available at the price they are prepared to pay and what is actually available.”

Part of the problem is that advisers currently working with institutionally owned dealer groups pay heavily subsided dealer fees and have access to extraordinary resources.

The cost to be non-aligned may no longer be worth it and many advisers don’t realise how heavily subsidised they have been in an institutional model until they leave, according to Fuchs.

The contraction of choice means major institutions now control the industry, and advisers who want to act independently have fewer places to go and consumers have narrower service models to choose from.

Fuchs said this is one of the unintended consequences of FOFA.