Picking the right dealer group

Some dealer groups do not always act in the interests of advisers. We suggest considering a few key non-negotiables when selecting a licensee.

Pre-FOFA, few predicted the rise of the independents and the decline of the institutional advice sector over the past five years.

The recent ASIC report into conflicts within the institutional vertically integrated business advice models will only accelerate the migration to the independently owned/independent space.

The fundamentals of FOFA and consumer education were always going to eventually compromise and politically damage the institutional advice models.

Any migrating advisers have essentially two choices; get their own AFSL or become licensed to an independent dealer group. Considering they have been negatively influenced over the years to avoid the responsibilities of operating an AFSL, selecting the right dealer for an adviser’s circumstances is the key critical decision.

With change comes opportunity but also new dangers to be wary of. Large national dealers now have the upper hand with being selective on who they will license and what the price will be, but as recent history has shown, not all dealers have the same model.


It has also demonstrated that price is only one aspect of making the right decision for an adviser's specific needs and circumstances. It is a fruitless exercise to select a dealer based only on price when ASIC is having a close look at whether the ‘cheap’ business models are sustainable.

Recently, one of our adviser members had a ‘near business death’ experience. This person was licensed to a large dealer group and made the participation decision primarily based on price. This dealer decided to terminate the adviser's arrangements without notice. Our Member Protection Fund (MPF) panel investigated the circumstances and found the adviser had signed an adviser agreement that gave advisers no legal rights on termination. A profoundly flawed position to be in.

The other related issue that has risen over the past 10 years is advisers being virtually discriminated against due to the poor market perception of the dealer they have been with.

This ‘damaged goods’ perception has occurred many times over the past 10 years, with advisers moving from banned or poor perception dealers and having real difficulties finding a new home.

Like most things in life, price is important but it is only one consideration. We suggest performing a basic SWOT (strengths, weaknesses, opportunities, threats) analysis that incorporates the following non-negotiables before joining a particular group:

  1. The market reputation of the dealer with a range of peers and whether they have had recent severe ASIC attention.
  2. Get a legal opinion on the adviser agreement and in particular the termination clauses.
  3. Meet the dealer management and those you must deal directly with to assess compatibility.
  4. Do you own your clients and can you take them with you if moving on?
  5. Does the dealer immediately set aside your share of any fees/revenue received upon receipt?
  6. What time delay is there between receipt by dealer group of funds and remittance to you?
  7. Can you leave the group without restrictions or commitments?
  8. Do you have restrictions on administration services/platforms/software you can use?

Changing dealer groups is a time consuming costly exercise that adversely affects day to day business activities and can be unsettling for clients. Remember the old adage, if you ‘pay peanuts you can get monkeys’, we suggest satisfying the above eight issues then look at the price and commence negotiations.

Peter Johnston is executive director of the Association of Independently Owned Financial Professionals (AIOFP).

The AIOFP board of directors has prepared a white paper to help advisers select the right dealer group. The document can be accessed here: https://www.ifa.com.au/pdf/Guidelines_for_Selecting_a_Dealer_Group.pdf

Picking the right dealer group
peter johnston aiofp
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