Planners seek new vehicles in master trust drive

Instead of investing in some of the largest master trust platforms or even badging with a platform provider, some dealer groups have now launched their very own master trusts, drawing on the expertise of funds management and back-office administration businesses.

Prompted by adviser demand for more platform choice and more investment options, Professional Investment Services (PIS) launched its master trust Mentor Investment Services late last year, with back-office administration outsourced to Oasis Asset Management.

A few months earlier, the Association of Independently Owned Financial Planners (AIOFP) launched its master trust, Personal Choice Master Plan, with IOOF Funds Management providing the administration backing.

Central to these dealer group master trust offerings is the outsourcing of administration platforms.

According to Oasis’ managing director Bruce Tustin, dealer groups that are launching their own master trusts represent the brave new world of financial planning and have the potential to threaten the domination of master trust heavies such as Navigator and Asgard.

“Absolutely it’s a threat. It’s the biggest threat they have ever faced. Advisers will migrate to platforms in which they have equity in the next five years,” he says.

Tustin says over the last few years it became clear there was an opportunity to provide administration business on a wholesale basis to master trust providers or investor directed portfolio services (IDPS), and to revolutionise the way traditional master trust providers gained business.

However, there is wider industry confusion about how dealer groups can launch an independent master trust given the cost and risk involved.

While Standard & Poor’s fund services ratings specialist Ramon Eyck is aware that some dealer groups are launching their own master trusts, he says it is a strategy that would only favour medium-sized groups that could afford any losses.

“It’s certainly something I’m seeing. Medium-sized dealer groups are becoming more interested in having their own platform and in the portability of funds,” Eyck says.

He says there are a few drawbacks to using an existing master trust platform, and this could explain dealer groups’ interest in forging a master trust path of their own. This includes the capital gains implications incurred when moving from one master trust structure to another.

However, Eyck says the cost to a dealer group of producing such a system would remove any existing administration support for the planners, and in turn, create an extra layer of administration.

On the funds management side, Rothschild Australia Asset Management director Stephen Karrasch is sceptical that the PIS and AIOFP launches are a sign of things to come.

“No, I don’t think so. There is tremendous competition. Wrap accounts have emerged as viable alternatives. They’re effectively a facilitator. Now we use these platforms as solutions. We are moving closer towards the Holy Grail of financial planning,” he says.