Structural separation the answer: Premium
The financial planning industry is starting to look more like it did back in the 1970s, with most advice tied to product; and conflicts of interest won't be eliminated without a structural separation of financial advice and product, according to Premium Wealth Management.
Premium general manager Paul Harding-Davis said the industry is looking more like it did when he joined in 1978, and despite having moved through a number of challenges, since then has now returned to a situation where around 85 per cent of financial advice is tied to product manufacturers such as banks, superannuation funds and life offices.
There will be some interesting conversations to be had around systemic conflict of interest and structural separation, but the future is bright for those in the niche and specialist space servicing sophisticated and high net worth clients, Harding-Davis said at a roundtable in Sydney yesterday.
Premium Wealth Management director and principal of Premium Financial Solutions, Phillip Leslie, said at the moment reforms were attempting to paper over the fundamental conflicts of interest of having 85 per cent of financial advisers working for product providers, and compared the practice to having doctors working for pharmaceutical companies. "Unless you put structural separation on the table, it's all a terrible game," he said.
Rodney Brown, director of Tristone Private Wealth, said the consolidation within the industry leading to more financial advisers being tied to product manufacturers was terrible for consumers, but presented a great opportunity for up-and-coming advisers who had their clients as their number one interest, because an ageing group would be leaving the profession.
Harding-Davis said he didn't predict much of a further increase in terms of more financial advisers becoming tied to product providers because as the larger groups continued to buy up distribution, other advisers who wanted to provide independent financial advice would leave to start their own businesses.
He said he would like to see the Premium business grow from it's current level of 20 practices to around 40 or 50, with one practice set to formally join the group today.
Recommended for you
ASIC has cancelled the AFSL of a Perth financial services firm following payments to its clients by the Compensation Scheme of Last Resort after a failed managed investment scheme.
Bravura chief executive Andrew Russell has announced he will be stepping down from the company, just under two years after his appointment.
Financial advice businesses with a younger, wealthier client base are enjoying higher valuations and increased attention from potential buyers than those with older clients.
A financial advice firm has been penalised $11 million in the Federal Court for providing ‘cookie cutter advice’ to its clients and breaching conflicted remuneration rules.
