PIS repositioning for future revenue
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The management of Australia’s largest financial planning dealer group, Professional Investment Services (PIS), are attempting to reposition the group in anticipation of a possible removal of commission-based income.
In an environment where adviser commissions and other volume-based payments to licensees are under threat, the group is ‘seriously investigating’ new ways of generating revenue, including the possible provision of banking products.
PIS chief executive Robbie Bennetts said the potential removal of a commission structure in the financial services industry would “force dealer groups not only to offer investments, but banking products as well”.
Bennetts said PIS wrote close to $1 billion in new mortgages last year, on which its subsidiary, Australian Loan Company, made a profit of approximately $100,000. By comparison, Bennetts said a bank taking 2 per cent on the same loan book would create $20 million in revenue.
Based on that disparity, and with traditional financial planning revenue under the spotlight, “you can understand why any group would have to consider where they go into the future”, Bennetts said.
“If you wipe [the current remuneration system] out, you have to go back to operating like the unions and the banks, where your margin is actually in the product,” Bennetts said.
“You might have to put people onto salary, but at least you will survive in the business.”
Bennetts said the group is in discussions with various funds management groups regarding possible joint venture arrangements that would allow the dealer group to share in profit margins. PIS already has a stake in funds management businesses Ventura Investment Management and All Star, but Bennetts said the group would “have to expand our product range considerably” under this potential new model.
The alternative to product provision for revenue in a world without commissions and volume rebates is for dealer groups to charge fees for advice. But Bennetts said he is “unaware of any examples where people have run a successful financial planning business or practice on honest hourly fees”.
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