Many financial planning dealer groups are “massively overstaffed” with inefficient and unproductive authorised representatives, according to Paragem managing director Ian Knox.
Knox said the financial advice industry is preoccupied with the number of advisers each dealer group has.
He pointed to Whittaker Macnaught, set to be closed by parent institution CBA on June 30, as a good example.Whittaker Macnaught has 28 advisers and $1.1 billion in funds under advice (FUA).“I was stunned [when I discovered that],” Knox said. “I would have thought that 12 [advisers] would be the maximum for [a] dealership of that size.” Whittaker Macnaught had to have $3 million “pumped into it” last year because it had too many staff, Knox said.
“Everybody in the industry seems to regard success as the number of authorised reps, as opposed to the efficiency and productivity of a small number of authorised reps with appropriate clients,” he said.Paragem currently has 14 practices and $1.6 billion in FUA, according to Knox.“We have three businesses migrating between now and the middle of June, which will take us up to $1.9 billion and no more than 40 advisers, maximum,” he said.Paragem only brings on planners who are already looking after more than $50 million in FUA as a minimum, he added.“We have very strict criteria,” he said. “We don’t want to inherit anybody else’s liabilities; if someone has a claims history we don’t engage with them; and we pay no money to anyone who joins.“We are unable to compete against large institutions or large dealerships that offer their services for next to nothing.”Knox said he is constantly approached by planning practices that are in the $20 to $30 million FUA stage.
“That sector of the market requires a large amount of supervision and monitoring, and it is no surprise to me that all the enforceable undertakings are always at the firms that have lots of advisers,” he said.The comments follow BT’s outlining last week of its criteria for practices looking to join its dealer channels.
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