New brand awareness for institutions

Whether it was their claims of independence, the arguable benefits of their supposed lack of bias, or their fancy names, non-aligned financial planning practices both small and large continued to attract a substantial chunk of the financial planning market. And not just any chunk. Fat-walleted clients have been their mainstay, especially for the smaller ‘boutique’ outfits.

Dropping the brand

So it’s little wonder banks and funds managers are still trying to perfect their non-aligned dealer group impersonations. Westpac-owned BT is the latest to get in on the act, announcing recently that it planned to launch its own dealer group in September, and few people expect it to be named Westpac Advisory Services or BT Financial Planning.

Others to go before BT include Dutch-based super bank ING, which owns a bevy of Australian planning groups including RetireInvest, Tandem and Millenium 3. RetireInvest, which some would argue is too large and mainstream to be considered a boutique, was a well known brand before ING bought it in 1993. Tandem on the other hand is an ING creation, purpose built to take high-net-worthers away from the boutiques.

Apart from sounding pretty, such pseudo-boutiques are beginning to behave like the real deal. For example, preferential remuneration arrangements at National Australia Bank’s (NAB) aligned groups — Guardian, Apogee and Godfrey Pembroke — were dropped almost two years ago says a spokesperson. NAB says it has also expanded its product offering.

Benefits of boutiques

But John Ives from boutique planning practice Ozplan says there are still plenty of things boutiques can do that the institutionally backed imitators can’t. This is why he believes boutique-planning practices will always hold onto their market share, no matter what the institutions come up with.

“A large dealer group will never be able to give personalised service like we do because we own the business, so you actually have ownership of the client relationship,” says Ives, who set up Ozplan two years ago after fleeing the unfortunately-named, and now defunct, Bleakley’s financial planning business when it was bought out by ING in 1998.

“Our advisers are welcome to sit down with a client at any time and say ‘we own the licence; it is our business’, and that gives us a point of difference to any institutionalised organisation.”

He also sights narrower recommended lists, kept tight by fears of compliance breaches, as a failing of aligned dealerships. And although some claim to have completely abolished preferential remuneration structures, he is still sceptical of claims by institutions that they have ceased providing their advisers with incentives to sell in-house products.

A point evidenced, says Ives, by the fact that institutions are avoiding pinning their own name on all of their dealer groups. Sighting BT’s planned start up a new dealer group in September with a fresh name, Ives asks: “Why not call it Westpac Premier Advisers or something? Why create a hidden name? It’s almost as if they’re scared to say they’re owned by Westpac, because that has a bad connotation to the client.”

All things to all people

But the institutions contacted by Money Management claim different brands are set up to cater to the needs of different clients. According to AMP director of advice distribution Steve Helmich, some clients prefer consulting a self-employed planner who has the backing of an institution. Others might be happy to walk into a bank and be offered bank-aligned products.

A spokesperson from ING says different dealer group names help the company cater to different types of client, with Tandem focusing on providing service to high-net-worth clients, RetireInvest targeted at a broader spectrum of customer and Millenium 3 concentrating on life insurance and superannuation. ING adds that like the situation of RetireInvest, if a brand that is acquired already has a good standing with consumers, there would be little point in changing it.

Despite the independent dealer group’s accusations of institutional bias to in-house products, it is also worth noting that some boutiques have joined forces to get higher margins out of platform providers. The 1,100 strong members of the Association of Independently Owned Financial Planners have recently struck a deal with six platform providers, including Colonial First State, which gives them an extra 20 basis points for using their products.

And even if institutionally aligned dealer groups are able to completely convince the market that they are able to offer a service as personable and unbiased as private dealer groups claim, non-aligned dealer groups will always have their place.

Although they probably wouldn’t care to admit it, setting up a boutique isn’t just about providing a better service to clients. It’s also about satisfying entrepreneurial ambition. No matter what the bigger institutions can offer, there will always be experienced business people who think they can do it better, and are good enough to have a crack at being their own boss.