Financial planning dealer groups are investing more in their internal research teams as part of a broad move to take greater responsibility for investment decisions.
Among the groups building up their in-house capabilities are Colonial First State (CFS), BT Financial Group and National Australia Bank (NAB). According to Zenith Investment Partners director David Wright, the move to develop in-house teams is owed to recent regulatory reviews, “the fiduciary relationship between advisers and their clients and the investment risk that the dealer is taking on board in terms of licensing the underlying advisers”.
“They really feel more comfortable with ownership of the end decision,” he said.
Wright noted that it was the larger institutions with scale that have been making the biggest investments of late, including CFS and BT, while he said NAB had made consistent investments for some time.
CFS general manager of advice Paul Barrett agreed that it was an industry drive, but felt it was not driven off the back of any negativity towards external research houses.
“What it comes from is that licensees need to take responsibility for the investment decisions and recommendations that are provided,” he said. “The licensees can’t outsource those decisions. I think a lot of parties probably took an eye off the ball to a degree in terms of where the responsibility lay and the GFC [global financial crisis] was a timely reminder.”
BT Financial Group senior manager of research Piers Bolger said investment in its research capabilities was part of the group’s strategy to “bring more responsibility in-house”. He added that it was a direct response to the fallout from the GFC, the competitive landscape and the regulatory reform agenda.
“We made a decision to put our hand up and say we want to take more responsibility for the research that ultimately determines our Approved Product Lists [APLs],” he said, adding that would bring “accountability in-house”.
“So it is up to our team to assess and interpret the research that enables all of our advisers to provide informed and strategic advice,” Bolger asserted.
Smaller, more ‘independent’ dealer groups do not benefit from the scale enjoyed by the large institutionally-aligned dealer groups and Wright said they would stick to the traditional model of retaining close relationships with outsourced researchers and research houses, while more would accept investment committees as best practice.
Wright asserted that the shrinking of APLs was the greater trend in this sector, and Wealthsure’s chief executive, Darren Pawksi, agreed.
“It’s just reducing the universe of products and making it more manageable,” Pawksi said, adding that it was another way of minimising risk.
He agreed smaller groups would tend towards independent investment consultants, an investment that Wealthsure had made over the past two years.
