Merger threat to investment platform FUM
Industry consolidation, particularly involving large dealer groups, has the potential to shift large volumes of funds under management (FUM) from current platforms into products aligned to the new institutional owner.
Questions were raised last week as to what will happen to the large volume of FUM in white-labelled BT products through Count Financial once new owner Commonwealth Bank takes over.
Money Management understands there is also significant FUM allocated to BT products through DKN financial advisers who are now aligned to major platform provider IOOF, while AMP has large volumes of assets in BT products and Westpac-owned Asgard, which it could theoretically begin to shift towards newly-aligned AXA products such as North.
News that BT had sent a communication direct to BT Lifetime Flexible Pension members giving them the option of setting up an advice fee for personal financial advice to replace the existing fee arrangement (consisting of an upfront and ongoing commission) drew more than 30 comments on Money Management's website.
Several financial advisers expressed disappointment that BT had contacted clients directly, and some suggested it was a move aimed at disconnecting clients from their current financial advisers to either reduce payments to non-aligned advisers or to create "orphan" clients that it could then acquire.
But a BT spokesperson told Money Management the sole reason BT contacted clients directly was its disclosure obligations, and was completely unrelated to the acquisitions of DKN and Count.
Mark Kachor, managing director of research house DEXX&R, said that ultimately it would be reasonable to expect that CBA would look to migrate the BT white labelled Count funds to its own platform.
Those funds would be unlikely to dramatically shift in the short-term because financial advisers would have to show the advice was in the client's best interests, and funds in superannuation products would also have to meet Superannuation Industry (Supervision) Act requirements.
However, he said impending Future of Financial Advice legislation may add a sense of urgency because as it stands, from 1 July 2012 new funds will be subject to the new remuneration regulations - but funds already in place will be grandfathered in terms of volume-based payments.
Profit is in the product rather than the distribution - meaning there would seem to be strong incentive for CBA to offer an equal or better proposition to clients currently in the BT version of the wrap, Kachor said.
He added that while one would expect Colonial First Choice investments to be available on the BT white label product, if they weren't already included they would be soon enough.
When contacted by Money Management, CFS provided a statement that read: "We've made it clear that going forward we intend to maintain Count's open architecture model."
Recommended for you
Clime’s disposal of advice licensee Madison “needed to happen yesterday”, managing director Michael Baragwanath has told Money Management, as he concludes a severe cost-out period at the business.
As Viola Private Wealth continues on its growth trajectory, the wealth management firm has appointed a seasoned investment professional to be its first chief investment officer.
Financial advisers who wish to implement artificial intelligence in their practices need to undergo a change in their mindset as to how they use technology.
With United Global Capital expected to constitute a substantial portion of CSLR compensation in FY25–26, what has AFCA ruled in its determinations on the company so far?
