Both banks and independent dealer groups face significant challenges

dealer groups

23 August 2010
| By Caroline Munro |

The proposed ban on commissions and volume-based payments present opportunities as well as challenges for both large banking institutions and independent dealer groups, according to consultant Hunter Southwick.

Southwick is the founder of FtB, a boutique consultancy firm that provides advice and services to a variety of financial services businesses, working with them to resolve complex issues in the front, middle and back office. He said the proposed reforms had thrown the whole dealer group value chain up in the air, and that both institutionally aligned dealer groups and independently owned dealer groups would have to adapt to significant challenges.

Southwick said the bank-aligned dealer groups had the opportunity to cross sell into the bank customer channels, although their older and more complex processes and technology could pose a challenge.

For independent dealer groups, the opportunities of eliminating trail commissions will mean they will be able to pick up a lot of new business, as practice principals either choose to let go of the C and D clients or leave the industry altogether. However, Southwick said that the shortage of skilled advisers would present a considerable challenge that may give the institutionally aligned groups the edge. Southwick added that groups such as AMP might fare better in this environment, since they have invested in training up an adviser base through their Horizons Academy – although advisers selling their own product would not be the best outcome for consumers.

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