Financial planning groups are expressing the need for a cultural shift when it comes to their choice of dealer groups after the global financial crisis and the Future of Financial Advice reforms gave them reason for pause, according to industry commentators.
“What we’re now seeing is cultural alignment where professionals and large practice heads are deciding for themselves where they fit within that heading,” Paragem managing director Ian Knox told InvestorDaily.
“In many respects, it’s hard to see a practice head sitting under a conflicted licensing environment.”
A few planning practices were stepping away from vertical integration and manufacturing alignments and instead approached licenses that could demonstrate business growth and profitability.
In addition, the attention on hidden revenue streams had enabled some of the bigger practices to reconsider how they could increase the margin in advice and decrease the margin in product, Knox said.
Victorian planning practice Future First joined Paragem from Hillross at the start of April in a move that matched a “cultural alignment of interests at licensing and advice levels”, he said.
The licence put a huge emphasis on cultural match to ensure they would fit together.
Paragem currently has 13 practices and expects to reach a capacity of 25 practices in the next 18 months.
Furthermore, individual advisers are primarily looking for a stronger cultural alignment when choosing a new dealer group.
“Adviser unhappiness was stemming from a cultural [perspective] every time,” My Dealer Group director Anne Fuchs said.
“An adviser that’s comfortable with X dealer group will no way be comfortable with Y dealer group because culturally they’re in a different place.
“They have literally fallen out of love with their dealer group, so perhaps the dealer group management doesn’t inspire them anymore.”
A cultural fit comprised areas in which advisers had developed a strong opinion, such as volume-based payments, fees, how clients were engaged, types of strategies and dynamic, tactical or strategic-based asset allocation, Fuchs said.
“Dealer groups need to acknowledge their culture and just focus on those advisers that are attracted to it as opposed to recruiting everyone,” she said.
About 20 advisers from an established business owner background had expressed a sense of urgency to My Dealer Group to exit their current licence.
“They’re not happy with the services they’re getting anymore so they feel like in order to continue to have a profitable business, they’ve got to get out of the dealer group relationship,” Fuchs said.
