The federal government’s Future of Financial Advice (FOFA) reforms have led many to consider what ‘unintended consequences’ the industry would face if the reforms became law.
However, there would have been few who would have put good money on Count founder and executive chair Barry Lambert agreeing to sell the dealer group and accounting giant to a bank.
Yet, the industry’s ‘Mr Independence’ looks set to lose his title and Count to become another group to fall prey to the reforms.
While it is believed FOFA played a large part in Count’s decision to advance its talks with Commonwealth Bank of Australia (CBA), the dealer group’s proclamation earlier this year that it would become its own responsible entity and the investor director portfolio services operator, and take the reforms head on sparked renewed promise for the big-tiered privately-owned groups.
However, news of Lambert’s recommendation for shareholders to vote in favour of the CBA offer would no doubt put a spanner in the works of those who looked to Count for guidance.
And yes, of course there are groups in the industry that are privately owned and can manage in a FOFA environment, and have managed in tougher times.
However, as Futuro Financial Services managing director Dennis Bashford wrote in his column this week, FOFA is “fuelling vertical integration business models” when such a model might not be the answer the industry needs.
“FOFA is fuelling vertical integration business models where the product manufacturer uses its advice network to distribute its own products, rather than supply advice that is in the best interests of its clients,” Bashford wrote.
“This means the institutions get a double clip. They take a margin on the product itself, then another margin to supply advice. In itself, this is not new.
“However, the manner in which these windfall profits are currently being used is the catalyst for the changes sweeping through our industry.”
He said in light of the creation of vertically integrated models, the control of distribution is being rapidly concentrated.
“In such takeovers, planners are likely to find that while the immediate pressure to sell a parent’s products may not seem intense, they would be very naive to believe that situation won’t change,” he said.
What are your thoughts?
Do you agree with Bashford’s comments on the industry?
