FOFA could create split in practices

The focus on asset-based remuneration and a shift to fee-for-service advice within the Future of Financial Advice (FOFA) reforms could create a split between holistic advice practices and insurance practices.

Synchron is one dealer group that stands to benefit from a potential shift in risk-focused advisers towards licensees who focus in that area.

Synchron director Don Trapnell (pictured) said the group was currently experiencing significant growth, which he attributed in part to the group’s risk focus.

Currently about 80 per cent of Synchron’s authorised representatives are risk writers, while the remainder are in other financial planning activities. Trapnell said this was attracting risk-focused advisers who felt their current licensee was too wrapped up in the FOFA reforms and looking to shift towards fee-for-service.

One adviser Trapnell spoke to said his financial planning-focused licensee was putting pressure on him to move to fee-for-service on risk, so that the licensee could claim to be 100 per cent fee-for-service.

“But he doesn’t want to charge on risk. He knows that if he gives a client a $2,000 bill the client won’t want to pay it, so we’re picking up advisers purely on this. Fortunately we can describe ourselves as life insurance brokers … we’re finding that to be a huge magnet,” Trapnell said.

Trapnell said that while many licensees were putting forward a public image of bravado and of being ready for the FOFA reforms and a shift to fee-for-service, that may not always be the case.

“The reality is some very good advisers will fall by the wayside and some clients who really need advice will no longer get advice because they can’t afford it,” he said.

Advisers are approaching Synchron and saying their licensee doesn’t understand what they do for a living, which is a strong part of where Synchron is picking up advisers, Trapnell said.

“There is a huge group of advisers who are dealing with risk, who aren’t going down the fee-for-service route, who are providing a very real service. By describing ourselves as life insurance brokers we’re finding those people are attracted to us,” he said.

Synchron currently has 185 authorised representatives, up from 173 at the start of this year, with another six going through the process of being appointed. The group is set to pass 200 by the end of May, Trapnell said.

Synchron’s target is to reach 280 by June 2013, but at the current rate of growth may achieve that by as early as June 2012, he said.

To grow past 280 representatives, the group would need to look at expanding its back office in terms of its current level of technology and staffing, which it would do once, he added.