Time to wean part-time financial planners off trails
There are too many part-time financial planners living off large books of trailing commissions.
That was one of the key points made during a Money Management roundtable last month dealing with the future of the platforms industry and the impact of the Future of Financial Advice (FOFA) changes on both platforms and planners.
And according to Paragem managing director Ian Knox, a major part of the problem for the industry has been the reluctance of older planners to evolve beyond the old business models built around trailing commissions.
He said commissions represented an historical reality for the industry, but that there were now "far too many part-time planners, people who have part-time jobs, earning far too little money, and they're representative of yesterday's player".
Knox also claimed that the financial planning industry had been a comparatively lucky industry because of the amounts of money capable of being generated by practice sales.
"… there aren't many industries that generate the amount of revenues the practice heads are, and they sell the businesses for three to four times that revenue," he said.
"Not many industries can do that," Knox said.
"Professional services generally talk about a one-times [recurring revenue] sale, the value of the business."
He said it was this reality which drove a lot of the industry thinking.
"Far too many people think about selling their business and the value of their business, rather than the emerging terrific opportunity around giving people advice in a very, very complex financial world," Knox said.
The other roundtable participants agreed that in the new regulatory environment created by FOFA, it was likely financial planners would be focused on servicing smaller client books and that this would alter the underlying dynamic of both the planning industry and impact the operations of platforms.
However, BT's Kelly Power said she believed scale would still need to be recognised in terms of offering discounts.
"I would say that, obviously, we're waiting for clarification on grandfathering and that will determine to a large extent which path is taken going forward," she said.
"However, I think the thing that's valued mostly by the dealer group and by their associated adviser networks is not necessarily the payment - although that's an important part of the relationship - but the scale benefit you get from coming to us.
"So BT's firm belief is that you should be recognised for that scale," Power added.
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