Would small IFAs be better off on salary?
The days of small independent financial advisers (IFAs) turning over less than $250,000 may be numbered with dealer group authorised representative costs rising in the face of increased regulation and associated overheads.
That is the assessment of former dealer group head, Paul Harding-Davis who said that many smaller IFAs with relatively low turnovers might be better off becoming salaried advisers from both a financial and risk perspective.
Harding-Davis’s comments came amid reports that a number of dealer groups were signalling that authorised representative costs would be rising to as high $80,000 a year to cover increasing regulatory compliance costs, professional indemnity (PI) insurance and access to planning software such as X-plan.
He said that while some dealer groups were already charging as much as $80,000 a year, he believed that costs around $65,000 were more common.
However, material developed by Viridian after it acquired much of the Westpac planning business pointed to a practice fee of $48,000 a year, together with an authorised representative fee of $22,000 a year for the first to authorised representatives and $15,000 a year for each subsequent authorised representative.
The Veridian material suggested that this meant that a financial planning practice with four authorised representatives would be paying a total of around $122,000 a year.
However discussion of the rising authorised representative costs have come at the same time as the Commonwealth Bank has confirmed a round of adviser and advice-related redundancies within Commonwealth Financial Planning.
Recommended for you
Following an extraordinary general meeting today, Dixon Advisory parent company E&P Financial Group’s shareholders have voted on its proposed delisting from the ASX.
While overall financial adviser numbers have dipped below 15,500 this week, Rhombus Advisory is experiencing growth and approaching 500 advisers in its ranks.
Iress’ Xplan continues to dominate the financial planning software market with a multitude of uses, according to Netwealth research, despite newer players battling for a piece of the pie.
ASIC has shared the percentage of breach reports related to financial advice in FY24, noting increased reporting by smaller AFSLs.
