Financial advice oligopoly trend may hurt planners
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The apparent eruption of a financial planning distribution turf war in the immediate aftermath of the acquisition of Count Financial by the Commonwealth Bank has led to warnings about vertical integration giving way to the creation of oligopolies.
A number of key figures in the financial planning industry have expressed concerns at the extreme figures being quoted as "sign-on fees" for Count Financial practices joining BT Financial Group.
Those figures have ranged from five times earnings and from $500,000 through to $1 million.
BT Magnitude Financial managing director Phil Butterworth has denied such figures have been paid, as well as denying suggestions that the strategy being pursued by BT Magnitude is counterproductive.
"There is nothing sinister about what we are doing and to suggest otherwise underestimates the commercial nous of the practices involved," he said.
Butterworth said it was simply a case of people making decisions relating to their best interests.
"It is about distribution but it is also about practices making decisions to inject efficiencies into their businesses and align to scale," he said.
Butterworth dismissed the phrase "sign-on fee" and said the payments involved were better described as "transition payments" which assisted in covering the costs of transitioning to the new arrangement.
He also confirmed that Count Financial firms were not the only ones being targeted, with those within other groups such as Professional Investment Services having also been subject to discussion.
However, Paragem managing director Ian Knox said he was becoming uncomfortable with the reality that the major players "are distorting the advice industry by making inroads to planning practices by paying them to become agents of their licences".
"I can't see how any licence-holder could ever recover that sort of payment without product obligation," he said.
"I sense we are increasingly moving toward an oligopoly in advice in Australia which in the long-term will come back to bite the planning industry," Knox said. "We've had an oligopoly in the platform market for so long and the result has been limited innovation.
"Do we really want advice to be owned and licensed by four banks and AMP?" he said.
Premium Wealth Management general manager Paul Harding-Davis expressed equal concern, saying he felt an overwhelming sense of déjàvu as the industry returned to the vertically-integrated days of the 1980s.
Referring to the high figures being quoted with respect to sign-on fees, Harding-Davis said that in the old days such payments were regarded as "loans", but there seemed to be a blurring of the line between "gifts" and "loans".
"But what is going on right now is hardly helpful in allowing market diversity to occur and it is certainly strengthening the influence of the major institutions," he said.
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