In order to attract and retain advisers, licensees will need to offer choice of platform on their Approved Product Lists (APLs) according to Pinnacle Practice Director, Anne Fuchs.
“The number one thing advisers contacting us via our My Dealer Group service want, is choice of platform on their APLs,” she said. “They are well aware that they have the primary relationship with the client and are therefore in the driver’s seat in terms of the advice proposition and so they don’t want to be told by their dealer groups how to run their businesses. They have always felt this way, but given the additional pressures they face with FoFA and difficult market conditions, this sentiment is now more emotionally charged than ever before.”
Ms Fuchs said the desire for platform choice is particularly prevalent amongst younger advisers who are not entrenched in a dealer group culture.
“They have many years ahead of them as professional advisers and are not interested in making money out of product,” she said. “Their value offering is about the delivery of advice and therefore they want to be able to use the products that are most appropriate for their clients’ needs.”
However, Ms Fuchs said that judging by the feedback from advisers, many licensees appear to be heading in the opposite direction.
“Institutional licensees appear to be shrinking their APLs, citing the FoFA Best Interests Duty and some non-institutional licensees are following their lead, believing they have to in order to survive,” she said.
“But the conversations we are having with advisers indicate that all this kind of vertical integration will do is drive advisers away. While advisers who work outside a vertically integrated model can pay more in fees and receive less in terms of support than those who work within one, it is a price many are prepared to pay.”
Ms Fuchs said My Dealer Group is referring advisers to only one institutional licensee. “This is because this particular licensee provides advisers with the flexibility advisers are looking for,” she said.
By not forcing incoming advisers to convert to their platform, Ms Fuchs said this licensee is able to successfully recruit new advisers to their ranks and, due to scale, the advisers enjoy the benefits of a full service dealer group at a reasonable price.
“It’s a little like an Anglican in a Catholic school,” she said. “They have similar values and beliefs but one doesn’t force the other to convert to their particular version of the Faith.”
Ms Fuchs said she is also seeing a trend towards smaller groups of advisers banding together to form co-operative licensee businesses.
“These co-ops want to establish a sustainable and reasonably profitable non institutional model that allows advisers to run their businesses the way they want to,” she said. “They are looking for likeminded advisers to join them to make sure the model is sustainable.
“At the end of the day, the feedback we are getting from advisers is that dealer groups will need to continue to evolve in order to attract advisers.”
