I watched the spectacle of the Royal Commission into the Misconduct in the Banking Superannuation and Financial Services Industry via live streaming and the ifa live blog.
It felt like I was watching an episode of Game of Thrones with shocking revelations and blood everywhere.
It is only post the shock that we have had the time to digest and think about the ramifications of what we have just witnessed.
I had originally thought the RC was unnecessary given the continual reviews being conducted and especially post the introduction of Future of Financial Advice (FOFA) and the Banking Executive Accountability Reform (BEAR). I believed that it was just the government having to bend to the political winds.
I was wrong.
The revelations were staggering and we will continue to see the ripples become tsunamis of change in the coming weeks, months and years.
One of which, of course, is licensing movement among financial advisers.
In the last two weeks, I have seen had substantial increase in the number of inquiries from planning practices and breakaway groups seeking assistance to find a new dealer/licensee or to achieve self-licensing.
Over the last 12 months, we have seen a clear preference to move to smaller dealer groups with less than 50 advisers that have a strong collegiate culture and where a single voice can be heard.
In addition to helping these individual practices move, a number of practices have come together to form break away groups.
The common theme in all cases is a desire to control the future of their businesses albeit with a fear factor regarding the obligations of compliance and the perceived costs of a non-subsidised environment.
When considering self-licensing, the average timeline is now six to nine months for an ASIC licence from submission of an application to approval. The cost of a “consultant assisted” application is on average $10,000 to $15,000 depending on the complexity of the business. PI insurance and ongoing compliance are two of the larger ongoing costs at approximately 2 per cent of gross revenue and between $10,000 and $60,000 (for an external consultant), respectively. Technology can also account for a considerable share of ongoing expenses, depending again on the needs of the business.
Many of the other services a business would typically need can generally be outsourced or conducted in-house. Forte has sourced best-of-breed external providers and has a working knowledge of those dealers/licensees also providing dealer-to-dealer/boutique services.
For those businesses seeking to migrate to an alternate dealer/licensee, Forte has and continues to conduct due diligence on most dealer groups’ offerings (ASIC actions, financial stability, culture identification, service offers, cost etc.) to identify the most appropriate and best aligned dealer/licensee in each circumstance.
We have received in the last two weeks the equivalent of the previous three months of inquiries in regard to sale of practices and exit of industry.
The current excessive demand to supply is slowly shifting as many bring forward their exit dates, which for many was the period up to and including 2024 with the mandatory education requirements.
The last two weeks points to future legislative change and business re-engineering, and for many they are taking a personal inventory and realising they do not have the energy for the change that is about to come.
Supply is growing but it is still not even to close to meeting demand, and there have been no changes in prices or terms being achieved. I do expect contractual changes to the way grandfathered revenue is treated.
It has been an astonishing couple of weeks that will change our industry forever.
To date there has been little legislative change to the benefit of the consumer. It is my hope that future change will start and finish with the public interest front and centre.
As Winston Churchill said: “There is nothing wrong with change, if it is in the right direction.”
Steve Prendeville is managing director of Forte Asset Solutions and Forte Dealer Solutions
Why the shock? This has been going on with the banks and insurance companies for at least 20 years. or for as long as I have been a financial planner. Vertical integration needs to go now and all financial planning firms need to be truly independent !
Really strange people complaining of this as an advert. An industry professional is talking directly on his business’ experience and transactions before/after the RC. If he just gave industry commentary people would still complain. He clearly disclosed his position throughout. All the complaining advisers either recommend vertically aligned, or worse badged products.. but that’s ok of course because you disclosed it…
I love this industry, when it does what it’s supposed to do. I’m like many of the commentators here, almost 20 years in the industry & have been completely fee only for 10 years. I’m optimistic, however I’m also realistic that it’s going to take a long time for Financial Planning to be considered an actual profession. The cost of providing genuine, individual advice is staggeringly high and in the current environment, only a few are willing to pay for it. One day, I dream, one day we’ll be on a level playing field with other professions – until then, keeping my head down and looking after my staff and clients.
This unfortunately sounds and looks like blatant advertising for Forte, shame on you Prendeville…
The real advisers that have been reviewing clients, providing newsletters and briefing days will finally benefit as they will now be playing in a level play field as the AMP and others that never did will have to do so or get out of the industry finally.
How about you come out and say who the movers and shakers are Steve and please make sure you have done your due diligence e.g. have they got a sound and robust compliance structure
Do they listen to the advisers?
Do they embrace technology?
Have they got the right support mechanisms and people in place to add real value to advisers?
How do they help advisers grow their business?
Sorry to say this Steve
unless you can clearly ARTICULATE THE DIFFERENCE and give advisers some clear direction on the quality dealer groups out there then your post is nothing more than an advert
and its not about monetary alliances that you may have with certain dealer groups its about being unbiased in your opinion so advisers can have an independent opinion
Who’s to say that he cant articulate these things? You are implying that he is getting payments from certain dealer groups, what proof do you have of that?
Do you give your potential clients all the answers on your website so that they then dont need to come to see you? I dont understand the point of your rant, except to throw a few stones at someone.
This industry is destroyed, not getting destroyed or worse it is destroyed.
This will be my last year in this ever growing pathetic industry. After 30 years of advising and helping clients without one litigation or problem I find it near impossible to do business and be profitable while maintaining a life.
I am sick and tired of being told I need to do more courses. I am sick to death of the FPA, AFA and other membership & education course floggers throwing me under a bus and forgetting who they should be supporting.
I am sick to my stomach of other advisers holier than though attitude who encourage this “education is everything” mantra while thinking they are a saint because they are “fee for service” when they know full well that most of their clients DO NOT NEED THAT LEVEL OF SERVICE nor need to be paying them for a hand holding market update and a birthday card.
The regulator is a toothless tiger constantly asleep at the wheel.
The clueless politicians like Bill Shorten wouldn’t know this industry if they tried and are coached by our corrupt FPA.
I’m sick of the FPA’s corruption and favouritism to their golden boy members who are slimy slick TV presenter types who can talk the leg off a chair and the dribble just flows. Like Sam Henderson, this industry is a disgrace.
I’m leaving and my exiting comment to any uni student considering this as a profession is DONT! Run to any other job but this one. You can not do business or give the right advice and be profitable financially or fulfilled as a life.
Sorry, this industry is a circus. What a joke, what a bunch of liars and car salesmen this industry houses.
Sadly, me too.
This industry I have loved is fading fast… it is sad, it really is
Bill Shorten’s wife is a Director of Industry Fund Financial Planning… Say no more..
I wonder when ASIC will give Industry Fund Financial Planning a rap over the knuckles for putting 90%+ of the clients they see into an Industry Fund super account with Industry Fund group insurance cover. If AMP & Bank advisers were sending a ‘disgracefully high’ level of approx 60% of clients into the ‘house’ product, what is 90%+???
You cannot seriously believe that an Industry Super Fund is the most appropriate option for that many clients. How can any adviser meet their best interests duty by recommending group insurance cover for their client?
100% agree with you, Shane – I’m leaving after 32 years.
I guess we all believed there would be change, and i guess we believed it would be an orderly transition …… hang on, what was I saying? Orderly is what happens in business , not government. If we must see a transition, then let it be over time. Heck, we have only just implemented LIF, we aren’t even 6 months in to the first 12 months. I’m fairly certain that there is still a significant proportion of the population who “won’t” pay for Risk advice. That said its not all bad, there will be a natural decline in the numbers of old “Riskies” which some might argue is overdue. However time to adjust is vital.
I remember in my old AMP Days when WOL and Endowment ruled the roost, we had a deferred commission package, paid over 5 years. The incentive was to ensure the business stayed on the books, forgetting the specifics of the products and the remuneration structures, the essence of the process was to sustain the policy over time. How many people would have died with no cover in place without the incentive for agents / advisers to keep the client paying the premium?
I am relaxed on one level, but disappointed on another, why should we pay a penalty just because there needs to be a new change.
Let’s face it, with risk insurance the cost structure will / should change. My question is if trails are switched off, will the unpaid trails flow back to the client? ….. I don’t think so, not initially anyway.
This is way more complex than even Peter Costello believes. It will need way more than 3-4 years to make an effective transition
It’s the cost of advice that is the real issue in the industry
But since FOFA came in, many years ago, there has been plenty of time to transition from grandfathered arrangements…. Many just selfishly assume the ‘good times’ not servicing clients can go on forever.
Well said Steve; its a mess of their own making and the regulator is guilty by omission. They misunderstood the business 20 years ago and now the system is dressed in blood and bandages.
We have seen an up-tick of inquiries to join our group but are taking that slowly – the first parachutes might be the ones to avoid.
I don’t think the movements of advisers are simply explained by the desire to self-license / move to a smaller licensee – although I am a little cynical.
Many advisers think that they are moving from the RC and ASIC’s target by self-licensing or moving to a smaller licensee that isn’t as vertically aligned – they are wrong. The RC highlights the banks etc as they are the biggest licensee and ASIC will hammer them as they get bank for buck but don’t think that the laws won’t change for all advisers.
I have heard advisers saying they are leaving XYZ Bank licensee to self-license as “best interest duty is overblown” or “ongoing advice fee requirements are over the top” – this may be the case today but once the RC digest the responses to the case studies etc we will undoubtedly see the changes filter through the industry.
I’m sure there is even a few bad eggs opting to move to smaller licensees so that they can go under the radar but it won’t be for long,
Granted, Prendeville is spot on about those giving up in droves given the rate of change is too fast. It will only accelerate from here with grandfathered investment commissions the next to be scrutinised and given up as a peace offering by the industry to the RC.
well said greener pastures you are correct
you can move around as much as you want but sooner or later best interest duty and compliance will be at the same level
Its no point hiding in small dealer groups that don’t have as robust best interest duty and compliance frameworks in place as you put yourself at serious risk when ASIC come knocking and the dealer group will also be on the hook
The same compliance frameworks that have me, the adviser, training my licensee’s pre-vet auditors instead of servicing my clients. Or that require me, the adviser, to standardise my ongoing service agreement so it fits the licensee, but not my client (resulting in a poorer contract for most of my clients).
How is this client’s best interests?
Who are you kidding…
both those things are poor outcomes. Any good licensee will require you to personlise/custom your firms service agreement. look elsewhere.
Interesting, so for those of us that are leaving … what happens to our grandfathered income, are we selling at current market multiples or not?? This is worrying as clarity will be when… Sept or October this year? What do you suggest we do?
It’s already too late Bobby. Unless you find yourself a willing buyer.
Yes, no i think things are going to be hold till the dust settles down!!
Think you know the answer to that…
I was interested in this until I realized he was spuiking his services, do your homework, the prices quoted are expensive…
Steve – what licensees are they going to??? Can’t see too many strong ones on the market!
Hopefully we don’t lose too many experienced and professional advisers bc we need them more than ever
I like your optimism but can’t see it happening.
As an almost 20 year vet within the industry who has the right degree, business is predominantly FFS & an exceptional compliance record I know I’m the type of adviser the industry wants to keep. I’m seen as the new breed of elder statesman to help lead the industry now & post 2024. However even I’m considering simply walking away. In a simple risk/reward analysis & looking at the effort required to provide simple advice, I think the mechanics of the industry are broken beyond repair. The effort required to build a business that works could be better invested into another industry. Clients don’t like what the regulator requires us to do. So more & more they will simply take the risk & do it themselves. This will of course create more blood-baths as clients get duped without the guidance of a good adviser.
Think of it this way. Why would anyone intelligent choose this industry now?
completely agree. i am in the same boat, highly experienced, competent and very well qualified but the risk v reward is just not there. it’s ridiculous burden growing everyday
The reason why anyone intelligent would choose this industry now is because all of you are choosing to leave the industry. Why would I not want to be in an industry where the demand for service remains strong but all of the good competition is about to walk out the door?
everyone, always says they have a perfect record and no complaints..but conveniently dont count the ones they didnt agree with..cynisim aside..i assume you are talking about newbies building a good business as being too hard, as you have already had 20 years. Nevertheless, the reward should still be there over the risk of sytems and staff in place. Yes, the $million dollar income making riskies wont be seen again , but that was money for jam anyway wasnt it? How many, largely uneducated jobs can make that sort of income anyway.
yeah like Bernie Ripoll’s articles on IFA – they are a blatant self interested product flog. Bit like Bernie really…a flog that is
Is this an opinion piece or paid advert?
Both
Both its neither news or contribution just a free add for Forte ,good luck.
Regardless of what it is, it’s Informative none the less