As the industry awaits the ruling from the Australian Competition and Consumer Commission on whether National Australia Bank (NAB) will be successful in its bid for the local assets of Axa Asia Pacific (Axa AP), consolidation at the association level is brewing.
Last week, debate over whether the FPA and Association of Financial Advisers (AFA) would merge into a single peak advisory pillar stepped up a gear with representatives from both fronts confirming they would meet to discuss their options.
Murmurs of a combined association have been around for a number of years, though they intensified last year following the Ripoll report’s call for greater unity within Australia’s financial services industry.
However, it wasn’t until dealer group Matrix Financial Solutions wrote an open letter over its concerns that informal talks between the FPA and AFA turned semi-formal.
The timing of such discussions between the two associations may also have been elevated by the FPA’s hunt for a new chief.
AFA chief Richard Klipin would not comment on suggestions a merger of both advice groups would leave the door open for him to lead the combined group.
As both associations have made their beliefs clear, obvious conflicts exist.
The FPA remains steadfast on its desire to see commissions banished from the industry, while the AFA believes in choice for advisers and clients.
It will no doubt be some time before a decision is made.
Another burning concern for the industry regarding impending consolidation is that of advisers retaining a strong independence foothold.
If NAB and Axa AP were to merge and if Professional Investment Services or Count Financial were to lose their privately-owned tag, smaller independent players would surely suffer.
In an impressive move, a chief of one large institutional firm said he was willing to inject funds into the independent side of the industry in a bid to help maintain a balance.
There has been a lot of hype surrounding the formation of a new independent advice association.
While this is a positive for groups seeking to show to clients their true level of independence from commissions and product selling, one reader offered a conundrum that many experience.
During a recent audit of his business, the principal was advised his firm would not qualify as being ‘independent’ due to the commissions the firm received from a large institution.
Despite stating that the same commissions the firm received are rebated in full back to its clients, the firm was still told it was not deemed ‘independent’ because of the business relationship.
The principal said the relationship with the large institution was for the firm’s cash account within its self-managed superannuation funds and non-superannuation portfolios, a business tie that would create a massive amount of paperwork for the business and its clients if it was severed.
“We have our own AFSL, have no associations with any financial institution, deal in directly-held assets only, however, due to us having to receive commissions from [the firm] and then rebate back – we are unable to say we are independent,” the principal said.
Is there a solution to this issue? Or merely another hurdle?
