Speaking to ifa this week, Mr Trapnell said he expects to see more product providers move out of the advice distribution space.
However, this is will not benefit consumers, he said.
“I think we’re going to see more and more break down of the vertically integrated model and I don’t think it’s a good thing, to be honest,” he said.
“Provided the consumer knows that the adviser, the licensee and the product provider are all one in the same, I don’t see any conflicts involved. There is a conflict when the consumer doesn’t know.
“If we take that away, all we are doing is reducing the number of outlets. That’s not good for the consumer.”
Despite these views, however, Mr Trapnell said he continues to ensure that Synchron is and will never be vertically integrated.
Concerns emerged in July 2016 when the launch of investment platform Valant Capital was announced. Mr Trapnell and John Prossor, also a Synchron director, are shareholders of Valant.
The story had generated concerns from ifa readers, who claimed Synchron was no longer considered non-conflicted.
Mr Trapnell continues to refute these concerns.
“As much as I said that we don’t mind the vertically integrated model, we’re not vertically integrated. And we don’t want to give that appearance,” he said.
“At a Synchron PD day, you might not even see Valent there. Or you may see it as much as you might see Colonial First State or any other platform.
“Valant gets absolutely no favoured treatment whatsoever.”
Mr Trapnell also told ifa that the process of his replacement has been slightly pushed back.
In June 2016, ifa reported that Synchron had appointed a new compliance manager and was on the hunt for a general manager to slowly take over Mr Trapnell’s and Mr Prossor’s roles.
However, it may take another 18 months to two years to appoint a general manager, Mr Trapnell said.
“I love doing what I’m doing. I love my job,” he said.
“I’m not ready to hand the reins over.”
Sorry to rain on everyone’s parade but vertical integration is everywhere from the insto owned dealer groups through to the fiercely marketed independents !!!!! Many non insto owned are taking platform/ product payments/ margins if not they are creating ‘internal’ investment products/ platforms / alliances to take margin etc etc etc. The debate can only take place if we all fess up and look at what really drives this – the inability to provide a licencee / dealer group that can make money from delivering advice and collecting a adviser fee that is at cost and not discounted below real cost ie being subsidised to look competitive while real cost hidden !!!!!!!!!!!
Don is partly right when he says vertical integration doesn’t matter if the consumer knows the adviser, licensee and product provider are all effectively the same. It still matters to some degree, but it provides the consumer with a much more informed choice if these things are patently clear. It’s when control & ownership is hidden behind different brands and buried in the fine print that consumers are in a much worse position.
If big institutions are allowed to own dealer groups like Financial Wisdom, Hillross, Millenium 3, Godfrey Pembroke, Shadforths & Maginitude, they should be forced to rebrand them so that the parent brand is included in their name.
I think it is much better to have individualised portfolios for each client that are reviewed every 3 months. In reality though, that is an enormously inefficient business model and unlikely to be delivered. Vertical integration is not the problem. It is how it has been sold by banks and industry super funds.
If another dealer group had this kind of set up before Don started his own investment brand he would have written a completely different article. This is a clear conflict of interest and Synchron simply cannot say they are a non-aligned dealer group. In every sense of the word they are aligned.
Yep. Valant is inhouse product for Synchron, just as SMSFs are inhouse product for accountants. The principle is much the same as vertical integration at the big banks.
The difference is that Synchron and bank licensed advisers still have to comply with a Best Interest Duty if they recommend their inhouse product to consumers. Accountants and bank tellers do not.
The conflict is NOT removed simply by letting the consumer know it exists! Now you’re just asking THEM to manage that conflict rather than you removing it. This is an issue that few in the Money Business seem either able to understand or deal with and until this nonsense about “no conflicts here” is removed advisers and consumers will be conflicted either with or without the full knowledge of all. No wonder ASIC tears its hair out when it sees dumb articles like this!
Fair point Philip. But will you and your IFAAA cronies acknowledge that pure fee for service advice with no inhouse product is also conflicted? Will you acknowledge that any commercial arrangement is conflicted to some degree, and professionalism is ultimately about minimising and managing that conflict?
Translation – Don doesn’t want bigger players moving into his competitive niche.
The assertion “Valant gets absolutely no favoured treatment whatsoever.” does not mean vertical integration is not present. It is VI and there is potential for a conflict of interest, if the assertion is true then this merely means that the potential for a conflict is acknowledged and is being effectively and appropriately managed. Given that Trapnell does not seem to even understand this, I suggest that the potential conflict is not being appropriately managed. It is time we stopped treating the symptoms and treated the disease. All product manufacturers must be required to divest of interests in the advice space over say 3 or maybe 5 years in an orderly manner and at fair market value.
Agreed
sounds like code for “Dear“, we are ready for sale.
vertical integration is only good for the BANKS there is absolutely no benefit to the consumer.
and Industry Super
Don- WRONG. A high percentage of issues destroying this industry started via vertical integration, greed and the ability to deflect mismanagement practices which allowed staff to be mismanaged and ultimately pay the price-maybe??? but NOT management-they are still there.
Until full and proper accountability is achieved, the same problems will arise again UNLESS the cause of the issues are removed-vertical integration which propagates the issues.
looks like double dipping to me , how can you have a badged product , shareholder, licencee director, and not be vertically integrated , definitely conflicted !!