The head of one of Australia’s largest dealer groups has expressed fears that boutiques will struggle to survive if the Future of Financial Advice (FoFA) reforms are implemented in their current state.
Just two months after the Government announced its proposed FoFA reforms the industry has already seen a move towards consolidation, with a number of dealer groups announcing mergers and structural changes to enable vertical integration with funds management and administration.
But Professional Investment Services (PIS) Group Managing Director, Grahame Evans, has warned that consolidation puts boutique firms at risk.
Mr Evans said PIS was extremely concerned about the boutique licensees that do not have the scale to vertically integrate.
If I was a boutique I would be pressing the government for some form of compensation
“If I was a boutique I would be pressing the government for some form of compensation like has been done for the dairy and fishing industry,” Mr Evans said.
“It is evident to most that the value of the boutique licensees’ business will fall as a result of these changes.
“This is not a cliff face exercise, it is a journey and as such we need to transition the industry in a way that does not destroy but ensures a level playing field. The last thing we would want is to go back to a quasi-tied agency structure. However, it appears with all the consolidation occurring that’s where we will end up,” he said.
In related news, IOOF has confirmed it has made an offer to purchase 100% of shares in the DKN Group.
In response to the proposal, DKN CEO, Phil Butterworth, commented: “It’s no surprise that there is recent industry sector interest in the quality assets of DKN which include the highly regarded Lonsdale Dealer Group, our equity positions in a number of Wealth Management practices and our Platform Distribution Business. In difficult market conditions we continue to attract quality practices and deliver consistently positive net flows into our Platforms.
“Whilst discussions with IOOF are proceeding, the Independent Directors and management will ensure business as usual at DKN,” Mr Butterworth said.
