'Aligned' dealers must be transparent: Ian Knox
Dealer groups aligned with big institutions should be honest with consumers and describe themselves as 'agents' of their parent company, Paragem managing director Ian Knox said.
He described the current financial planning marketplace as an oligopoly, and compared it to the 1980s when National Mutual and AMP were "killing each other … by buying each other's agents".
"Now the banks are doing it - they're creating an agency network and calling them advisers," Knox said.
The way financial planning businesses are structured is the "complete reverse" of what should exist in Australia, he said.
"Large institutions are vertically integrating down into non-profit-making areas called dealers. Why would they do that? And then they say: 'We're not into distributional product'. It's farcical," Knox said.
On the other side of the coin, independent dealer groups are running their businesses on an unlevel playing field, watching institutions "use money borrowed from asset management and other areas to lose money in the advice chain so they can get more advisers", he said.
The independent market needs to respond by innovating and "moving up the value chain", Knox said.
However, transparency issues aside, he said advisers should "embrace and welcome" the strength of advice through the institutional marketplace.
"I don't think the institutional marketplace has created many problems at the point of advice … Their APLs have been good, and they've provided good solid outcomes.
"Since [the Financial Services Reform Act], most of the problems have been attributable to the independent marketplace. But not the good end of the independent marketplace - the bad end," Knox said.
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