High quality support, not cost, should be at the forefront of a principal's decision-making process when it comes to selecting a dealer group, recent reviews by the Commonwealth Bank of Australia (CBA) have shown.
The accreditation reviews, conducted by the bank's financial planning banking team across its 17 CBA-accredited dealer groups, revealed those that provided quality support and were diligent with compliance requirements achieved greater ratings from their practices.
Because member firms outsourced vital functions to their dealer group, a quality before cost mentality was needed as the services delivered greatly impacted upon practices, CBA financial planning banking market development executive Ian Anderson said.
"In the past principals have given a lot of focus to the cost benefits provided by a dealer group, whereas now they're seeing that the cost of working with a dealer group that is non-complaint and which doesn't offer quality support can often be far greater," Anderson told InvestorDaily.
CBA's findings revealed that dealer groups which received a higher overall review outcome by their practices were found to have a higher ratio of dealer group staff to advisers, a robust organisational structure and reporting channels, and higher adviser retention.
They were also found to have low-risk products on approved product lists, low gearing, greater access to capital and strong policies and procedures in place delivering stringent and frequent monitoring of key AFSL (Australian Financial Services Licence) requirements.
Corporate governance was also a key factor, Anderson said.
Since the market downturn, dealer groups including Premium Wealth Management, ComCorp Financial Advice, Lonsdale and Financial Services Partners had all on separate occasions said they had noticed an increase in inquiries from practices wanting to become member firms.
These groups all said that amid the global financial crisis, principals were more closely scrutinising whether current dealer groups were providing the quality that was expected.
