Planners should take back master trust control

FINANCIAL planners with funds manager relationships for master trust and wrap account functions could be doing more damage to their practice than good, according to Association of Independently Owned Financial Planners (AIOFP) chief executive Peter Johnston.

As the investment markets experience a downturn in returns, investors are paying more attention to the fees they are being charged, and the services they are receiving for those fees, Johnston says.

“The public are getting more fee conscious and wanting value-added services to justify their relationship with the financial planner,” he says.

According to Johnston, the extra cost included in services that are institutionally run will ultimately hurt financial planning practices because they absorb the fees.

“With the expected downward pressure on fees over time, institutional services will not be in a position to reduce their margins without major service or benefit reductions, leaving the financial planner to take the hit on revenue reductions,” Johnston says.

With the availability of independent IT operators and financial institutions now subcontracting administration functions, Johnston says financial planners are now well placed to operate their own master trust and wrap account services.

Johnston says the experience of AIOFP member firms is that clients like their adviser having an overseeing role in the administration of their funds.

He admits setting up an in-house system can be a costly business, but says there are ways it can be done.

“It is obviously not feasible for every financial planning group to establish their own service, but strategic alliances with groups of similar culture and compatibility will ensure critical mass can be attained.”