Transition payments can be 'quite reasonable'
The debate about so-called 'transition payments' being paid to planners is "a little overhyped", according to financial planning consultant Wayne Wilson.
"If you're moving licensee and you have to move platforms, then that's an expensive business. It's quite reasonable to think that it's worth receiving some kind of financial support to help you do that," he said.
In most cases, incoming financial planners are required to switch to their new licensee's preferred platform, Wilson said.
But even if a planner decides against switching platforms, they run the risk of operating an inefficient business, he said.
Ultimately, any financial planner contemplating switching licensees must provide a compelling reason to their clients, Wilson said.
"The client has to be at a financial advantage or at least break-even and not at a financial disadvantage, so you can't just do it by whim," he said.
Wilson put the fierce competition for existing financial planning practices down to the lack of normal organic growth in the current environment.
"There are not enough new planners entering the marketplace to create new businesses, and there aren't enough funds entering the platform space," he said.
"You've got these wealth businesses that have got to try and drive profit outcomes. If they can't get it from organic business, then they've got to basically pinch one another's [practices]," Wilson said.
He anticipates more movement as the Future of Financial Advice reforms become more clearly defined.
"I think FOFA has constrained behaviour for a period of years. I expect that to change over the next 12 months," Wilson said.
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