Certain industry players are unfairly targeting small licensees with malicious and unwarranted comments, as a new breed of financial advisers look for better value from licensees, regardless of group size.
Degree-qualified, professional financial advisers in their 30s and 40s were casting a critical eye over the fees charged for dealer group services and looking for value for money, Pinnacle Practice and My Dealer Group director Anne Fuchs told InvestorDaily.
However, some licensees were using examples such as Morrison Carr Financial Services, which had its Australian financial services licence and Australian credit licence cancelled by ASIC, to discourage advisers from considering a smaller group, Fuchs said.
"There are people in the industry tarring all small licensees with one brush, suggesting that because a licensee is small, inexpensive, doesn't have a cast of thousands and yet still offers an open approved product list (APL), it can't have good corporate governance and robust levels of compliance," she said.
"They use Morrison Carr [to demonstrate] that there's a higher risk attached to small boutiques and dealer groups, and certainly when their commercial terms are less expensive, that the two are linked, but there are big dealer groups that have had massive corporate governance problems that are not cheap either in terms of their dealer fees."
Fuchs said there were a number of small niche licensees that had a strong corporate governance culture and advisers should not be put off by the negative comments.
In addition, she feels advisers need to start questioning licensees about their ability to pay professional indemnity premiums and ensure they have adequate compensation arrangements.
Regardless of size, dealer groups could not afford to ignore the needs of the new breed adviser, as some were paying $15,000 to $20,000 more in licensee fees for open architecture APLs and could no longer justify it, Fuchs said.
"Dealer groups won't grow and they'll continue to lose these people if they don't come up with an alternative offering," she said.
"We keep seeing the land-grab for distribution, particularly in the institutional space, so the challenge is to attract the younger, degree-qualified planners that haven't got the bad habits of yesteryear and who are here for the long term."
