Counsel assisting the royal commission Rowena Orr QC tendered a document during proceedings which quoted Mr Hagger as saying: “The business model associated with aligned advisers needs to be reviewed in the current environment”.
Asked by Commissioner Kenneth Hayne to clarify his statement, Mr Hagger, who is chief customer officer (consumer banking and wealth management) at NAB and chairman of JB Were, gave an astonishing assessment of the authorised representative model.
“The aligned advice network consists of small businesses all around Australia which are advisory businesses,” Mr Hagger began.
“And through our licence…we stand behind the advice of those advisers. We stand behind appropriate advice and we stand behind inappropriate advice. And in return for that, we receive a licensee fee.
“To the extent that there is inappropriate advice in the network, the risk-reward equation…looks different today to what it looked like in the pre-FOFA days, because in the pre-FOFA days – in fact, I probably have to go back even further than that – but in the days of product economics into the advice world, the risk return equation was quite different.
“Now we see a different return profile and a different risk profile.”
Pressed further by Commissioner Hayne whether he means an equation that “works against NAB remaining in that type of arrangement”, Mr Hagger said his comments are broader than just his employer but that the appetite had diminished for “big organisations”.
However, he added that were “big institutions standing behind small businesses” no longer seen as a positive in the financial advice industry, then ASIC and other regulators would face pressure from a “more fragmented environment”.
The comments followed evidence tendered which confirmed that NAB is considering sale of its financial advice assets, despite Mr Hagger saying he did not wish to make an “announcement” at the royal commission.
doors are wide open at Dover too, they are recruiting
Well Shartru Wealth is actually looking to grow its advisers and sees the current going ons a huge opportunity for those that have been doing the right thing and have a sustainable business model.
In saying that we only want advisers who follow our processes and share our philosophy of “we work for the client to solve their problems”.
What Mr Hagger means is advice networks are no longer profitable. Post FOFA there is no compelling reason for advisers to flog bank product (other than its on the APL).
Presently poor advice brings reputation damage to the brand & the bank’s could do without the scrutiny.
But let’s not forget this Royal Commission is not just focusing on financial planning. The first round brought attention to banks poor lending practices. Again driven by profit motivation.
The bank’s are in a privileged position in Australia. At some point in time they will need to their social responsibilities.