FOFA ushering in a new financial planning reality

The dealer group model is changing and BT's Mark Spiers says financial planners will need to make choices consistent with the newly evolving reality.

The financial planning dealer group is not dead, but the underlying model has been fundamentally altered by the Future of Financial Advice legislation and other market factors, according to BT Financial Group general manager, advice, Mark Spiers.

In an exclusive interview with Money Management, Spiers identified the manner in which the Australian financial planning landscape had changed and acknowledged the creation of a bar-bell effect, with fewer but larger groups at one end and fewer, smaller groups at the other.

In short, he said the reality likely to emerge in the planning industry was a choice between a “cottage industry” approach to planning and the scale approach capable of being delivered by groups such as Westpac/BT, the Commonwealth Bank/Colonial First State, NAB/MLC, ANZ and AMP.

What is more, Spiers believes that the bar-bell effect is not only becoming a reality in the financial planning arena but also among the industry’s service providers, including research houses and information technology providers.

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Despite this, and while the dealer group model may change, dealer groups will continue to exist in Australia because they represent a necessary part of the regulatory landscape – the bodies which provide authorisation to authorised representatives.

Spiers did not discuss the perceived “turf war” which had broken out between Westpac/BT and Commonwealth/CFS, which saw the offer of large retention and transition payments to some planning practices, particularly following Commonwealth’s acquisition of Count Financial.

However he did agree that distribution had become the key – whether this was via banking networks, credit unions or accountancy practices.

It was about providing more “natural access to clients”, Spiers said.

While acknowledging that the newly-emerging financial planning landscape was resulting in the demise of a number of mid-size players, Spiers played down the suggestion that Westpac/BT might be actively considering acquisitions.

Directly questioned on whether a mid-size dealer group such as Matrix might be of interest to Westpac/BT, Spiers insisted that while it was fundamentally focused on organic growth, it did not ignore such opportunities.

“We always look at opportunities as they arise, but most of our growth is organic and aimed at attracting like-minded people,” he said.

“We’ve had no trouble attracting high quality people, so any acquisition would need to represent a compelling proposition for us.”

At the heart of the Westpac/BT approach as outlined by Spiers is the creation of a service delivery proposition within which planners can operate at a number of levels, based on a belief that planners will need the capacity to deliver a full range of services to clients by, in effect, “earning all the client’s business”.

He said this entailed being able to deliver a full range of services, from supporting and advising self-managed superannuation funds through to estate planning.

In the mind of Spiers – and clearly a part of the Westpac/BT strategy analysis – are five points reflective of the developing new reality:

1. Dealer groups need to be the result of the coalescence of like-minded individuals.
2. Entrepreneurship is a necessary part of the equation.
3. Aggregation can be a necessary part of gaining scale.
4. There will be an increasing need to affiliate with a professional services provider.
5. The regulatory environment will continue to support dealer groups.

It is hardly surprising that the model being pursued by Westpac/BT fulfills many of the five points outlined by Spiers, with perhaps the most important being that its strategy entails bringing together planners who it regards as being “like-minded” and a good cultural fit.

He suggested that the options facing planners would be relatively stark, with scale or the ability to access the benefits of scale being at the heart of their underlying business models.

Spiers likens the approach being pursued by Westpac/BT to providing an eco-system for financial planners which can accommodate salaried practitioners at one level while allowing them to gravitate towards becoming more independent.

“They have the opportunity to morph, to change,” he said.

“Ultimately they have the ability to choose between whether they operate under our licence or their own.”

On the question of whether planners operating under the Westpac/BT model will simply be feeding the company’s platforms, Spiers suggests that there is nothing to stop planners looking elsewhere.