Post-FOFA ‘marketing war’ predicted

David Chin of BasisPoint Consulting told ifa that financial planners will have to fend off competition as the rules allowing trail commissions to continue take effect from July 2013.

“Under FOFA, the existing client will continue to pay trail commissions and so planners have an incentive to keep that client base and keep those payments flowing in,” Chin explains.

“However, there will also be heated competition for these trail commissions from planners who don’t have an existing trail book as well as listed investment companies and exchange traded funds.

“For planners without a trail book, this is a significant opportunity that will open up.”

Describing the ensuing scenario as a “marketing war,” Chin anticipated that many players will adopt strategies to specifically target these clients who are permitted to continue paying ‘conflicted’ commissions.

In order to keep hold of their existing trail books, advisers will need to adopt to ensure they maintain close client relationships.

“It’s a matter of keeping up the trust levels and keeping hold of your existing clients, this will now be very important to stop others from muscling in on their turf,” he said.

“It could also be helpful for advisers, in discussions with LICs and ETFs to let them know that any aggressive moves may backfire by providing problems for their distribution channels.”

Chin also points out that incumbent advisers many have a natural ally in the larger institutional players, who “have a stake in maintaining the status quo and will not want business to go to the LICs and ETFs.”

Post-FOFA ‘marketing war’ predicted

Aleks Vickovich

Last Updated: 30 April 2013 Published: 04 April 2013