Unintended Consequences – Will the Independent Adviser Survive?

Do you believe that independent advice practices will become extinct?

  • No (49%)
  • Yes (41%)
  • Not sure (9%)

Our latest poll considers the future of the truly independent licensee and adviser, post FoFA, as we ask:

Do you believe that independent advice practices will become extinct?

Drawing on recent experiences outlined by Pinnacle Practice’s Anne Fuchs (see: Future of Independent Adviser Under Question), there appear to be a number of factors contributing to the fast-disappearing, truly independent advice model.  These include:

  1. Unintended consequences associated with the introduction of the FoFA reforms, eg implementation of new compliance systems and accounting for increasing compliance costs to the practice
  2. Institutions continuing to take strategic shareholdings in boutique groups in order to boost numbers in their adviser networks
  3. Heavily subsidised fees offered by institutionally-owned licensees to advisers operating under their license(s)
  4. Additional significant resources being made available to advisers by institutionally-owned licensees

In the lead-up to the implementation of the FoFA reforms in a few months, this present market environment seems to paint a gloomy picture for the ongoing viability of the independent advice model.

But is this current trend simply a reflection of what, with the benefit of time, will emerge as a low-point for independent licensees in an ever-repeating cycle of advice practice expansion and contraction?  Will new-style boutique practices emerge as the dust settles on the FoFA reforms?  Or could this current trend, if it continues, sound the death knell for truly independent advice, both real and perceived?

While our poll question is a little simplistic and perhaps also a little alarmist, the issues surrounding it are real and complex.  There are those who envisage the mid-size independent dealer group is the model that is under real pressure at the moment, but who also believe that the very small advice practice operating under its own AFSL, as long it has updated its systems and advice models, can flourish in a post-FoFA era.  Alternative opinions argue that the overwhelming majority (98% +) of the advice industry will, in future, have ties back to institutional owners and stakeholders.

Looking at the question from a different perspective, some advisers may ask whether it will even matter, in future, whether his/her dealer group is institutionally owned, as long as their clients are receiving unbiased advice, appropriate to their circumstances, provided in their best interests, and where there is no pressure on product selection.  But other adviser opinions may differ, preferring there to exist not even the faintest hint or perception of any potential conflict of interest arising from the ownership structure of the dealer group.

Where do you stand on this question?  Do you even believe the question has relevance within the broader debate associated with how the financial services industry can deliver advice to millions more consumers, or how you can use day trade cryptocurrency to make more money?  What is the future of the truly independent adviser?  To what extent does it matter?  Tell us what you think…

3 Responses to Unintended Consequences – Will the Independent Adviser Survive?

  1. BillB March 20, 2013 at 9:53 am #

    Ah, navel gazing again. Its no surprise that FOFAs cost will ipact.

    I have a test I apply to these sorts of gratuitious public comments – who is making the statement and whats in it for them. Works a treat !

    I seem to recall a number of advisers argued FOFA would be good for increasing our “professionalism ” and became early adopters

    Even stranger, the FSC and its mates were all fired up on FOFA

    Now we now why – those big banks/life offices think FOFA is a golden chance to re-capture control of ALL Liencees.

    It is, as it ever was, all about DISTRIBUTION and CONTROL

    • MK March 20, 2013 at 1:05 pm #

      Bill, you have hit the nail on the head! Never was & never will be about clients best interest. Always about money and control, & this Govt is handing it straight to the banks.

  2. Dave W March 20, 2013 at 9:56 am #

    A lot of noise- just like the detractors looking at the markets. Independants and non-aligned will be a force that grows again once all the hype and scare mongering abates. The big guys have fed on the hype to build market share and lined a few pockets on the way. FOFA has been built up as a brick wall- take a good look at what it really is- think about it and you will see its easy to accommodate. -Unless you have sold out to the big guys, that will be hard to reverse.

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