Regulators must watch competition
The regulators should ensure that non-institutionally aligned dealer groups remain competitive so that advice is not dominated by the banks and industry funds, according to managing director of Snowball Group, Tony McDonald.
Snowball has been working on a number of issues to ensure it is ‘future-ready’, said McDonald. However, regulators needed to ensure the Future of Financial Advice (FOFA) reforms did not add to costs and did not negatively impact on competition in the advice marketplace, he added.
For some time Snowball has worked towards providing a kind of limited advice, which McDonald prefers to call ‘event advice’, has pioneered telephone-based advice, and is in the process of providing more tailored platform offerings. The main driver behind change for the group has been a change of attitudes among consumers, he said.
“We think the way in which consumers are approaching advice will be quite different and we’re seeing that consumers are starting to think about the difference between limited advice, event advice and traditional holistic advice,” said McDonald.
“Undoubtedly the [global financial crisis] and [the] sovereign debt crisis has caused consumers to start to look at investments and transparency in a different light, and certainly there’s heightened interest in having a degree of greater control. Cost is also becoming an issue.”
McDonald said the driver for innovation was a realisation of the change in consumer attitudes following research commissioned by Snowball about a year ago, as well as the principles underlying the FOFA reforms, which he said were valid and consistent with the consumer research. He added that it was also increasingly important for dealer groups to offer financial planning practices — whose revenues were coming under increasing pressure — with the scale, as well as access to infrastructure and support services to enable them to compete.
“It’s critical that people like us have got scale, and sit there in the middle and provide these services to advisers,” he said.
Regardless of what reforms were implemented, regulators needed to keep an eye on making sure they did not add to consumer costs and supported competition in the marketplace, McDonald said.
“The prize you’ve got to keep your eye on is making sure that there is a vibrant, competitive marketplace, where non-aligned advice groups can organise arrangements with platform providers and fund managers where they can drive down the price and compete viably against banks and industry funds on the advice side,” he said. “Because banks are going into advice and industry funds would be mad not to go into advice, you want to have a third pillar, which is the non-aligned, non-institutionally owned advice businesses.”
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