DKN confidence reflected in BT Wrap deal

DKN Financial Group has reinforced that it is not concerned about the possible removal of volume rebates between platforms and dealer groups, signing a new five-year contract with its longstanding preferred platform provider BT Wrap.

The two groups have already been working together for more than 10 years, and DKN is one of BT Wrap’s top five most lucrative clients. Between June 2009 and March 2010 DKN channelled more than $6.5 billion through investment platforms — the vast majority going through BT Wrap, with AustChoice and others accounting for a smaller amount.

Of its $7.8 billion of funds under advice over that period, around $1 billion went straight into product.

DKN has made it clear that it is not concerned about the possible removal of volume rebates between platforms and dealer groups, saying its role as a service provider to dealer groups excludes it from being one of the sources of potential conflicts of interest being targeted by Financial Services Minister Chris Bowen.

In responding to Bowen’s reforms, DKN sought to point out that it packages and distributes platforms to wealth management firms, and doesn’t provide any financial advice.

Furthermore, Butterworth said the majority of advisers that access BT Wrap through DKN are fee for service advisers, and as such the level of rebates and commissions paid by DKN to dealer groups is minimal. By removing in-built commissions from its platform products, DKN had been able to lower the cost of the product to dealer groups, Butterworth said.

He said the arrangement had been one that had worked well for both BT and his company.

DKN does not hold an Australian Financial Services Licence (ASFL). Other services to dealer groups are provided through DKN subsidiary and AFSL-holder Lonsdale Financial Group, which Butterworth said must remain profitable in its own right.

DKN’s model may be one other financial services groups seek to replicate as they attempt to find ways to circumvent a potential ban on volume rebates. Professional Investment Services has a somewhat similar model in place through its Associated Advisory Practices business, which offers services to smaller, independent firms in return for clipping the ticket on rebates.