The survival of independent dealer groups will largely depend on their ability to stand on their own two feet financially, a dealer group chief has said.
"Those independent dealers that learn to stand on their own feet in terms of financial structure, product offerings and risk management can survive and prosper," Futuro Financial Services managing director Dennis Bashford told InvestorDaily.
"But they must also realise that the way things have been done in the past may be less relevant today, and have the courage to adopt a more pragmatic approach to business."
Bashford said while all of the regulatory changes currently sweeping the industry were a step in the right direction, they would not create an even footing for the industry players.
"The uncertainty surrounding the payment of fund manager dealer incentives will see many small to medium dealerships that have come to rely on such payments struggle for survival unless they reengineer their business model," he said.
"The result will be that more independent operators will be absorbed by the institutions and fewer independents will enter the market. The consequences are not difficult to foresee."
The financial planning market will be concentrated into fewer hands with the major winners being the institutionally-owned licensees, Bashford said.
"There are a number of longer-term consequences. First off, as small dealers don't receive subsidies from institutions, they will find it harder to compete," he said.
"They will struggle to match the higher salaries and lower dealer fees of their institutionally-owned peers, making it harder to attract and retain planners."
Meanwhile, clients of the large institutional and independently-owned licensees will be short changed, Bashford said.
"They are already suffering from a reduction in choice, both in terms of number of dealers that they can turn to for advice and, more importantly, in terms of the products and investment strategies that they can pursue."
