There are some very major changes going on in the Financial Planning space at the moment and these changes affect everyone. There is new legislation coming in to force on July 1st banning ‘conflicted remuneration’ for new clients in investment products along with a range of other changes. This was brought on by several high profile collapses a few years ago such as Storm Financial, where a mortgage was sold (commission) and this was used to gear into Storm managed funds (more commission and entry fees).

Fees were huge and the quality of advice was terrible. The consequent inquiry and changing legislation, together with a tightening mortgage market, has resulted in an unintended consequence of banks buying up Financial Planning practices (or Dealer Groups) and mortgage groups in order to gain distribution.

Here are some recent examples.

Count Wealth Accountants - After years and years of Count (a popular Accounting Financial Planning group) proudly advertising their independence, they have now sold the group to CBA.

Aussie Home Loans – Sold recently to CBA. “We’ll save you!”

Yellow Brick Road The mortgage group that has now expanded into Financial Planning has just sold a large part of their business to Macquarie Bank.

So why is this happening?  Distribution and vertical integration.

They are trying to gain control of distribution and then ‘assist’ where funds may be invested or loans are placed. And get a cut at every stage from cradle to the grave – banking, loans, housing, insurance, super, pensions etc.

Imagine the outcry if drug companies started to buy up medical centres and then dictate that only their products or brands could be used?  This is essentially what is happening in the financial industry.

I was approached recently by a Large Bank Owned dealer group and was offered a sizable carrot to become their “Brand X Advice Centre”. I am sure that I am not the only independent financial adviser that is being targeted.

I politely turned them down – I value my independence too much and also the ability to chose the most appropriate solution for my clients without being limited by any bank’s suite of products. Most financial advisers (over 90% and increasing) are now licensed through a dealer group owned by a large financial institution. That model might be OK for ‘non engaged’ clients who think they don’t need advice, don’t want it and certainly don’t want to pay for it. Profit is made through transactions on PRODUCT and other related services (vertical integration), rather than advice or strategy.

Now I suppose that a very limited range of products with some advice is better than nothing, but it is hardly what you would call comprehensive or strategic advice likely to add significant value.

With the combination of changing legislation and the growth of the very large groups increasing distribution, the ‘middle’ group is now being squeezed. Most are being absorbed becoming part of the larger groups. Some are moving the other way and focusing solely on ‘High Net Worth’ clients that can afford to pay for good advice.

At BD Financial Planning,  we appreciate your ongoing support. We will continue to provide high quality, strategic advice from a boutique, independently owned practice. We are licensed through a dealer group that is independently owned. And if you have family, friends or business associated who may appreciate unbiased advice, we would be very happy to schedule a complimentary chat to see if we could be of assistance.


Brett Dilllon CFP

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