Let's Dance

Count Financial’s move to resposition the business is the first signal of a new dawn for Australian licensees.

Count announced last week it would become the IDPS operator and RSE in respect of its strategic platform offerings in response to the Future of Financial Advice reforms (FoFA), which banned volume based payments.

Under FoFA, the Government is proposing a prospective ban on any form of payment relating to volume or sales targets from any financial services business to dealer groups, authorised representatives or advisers.

One of the intended benefits of this ban on volume payments stated by the Government is that it will enhance competition with platforms competing with one another purely on price and quality for the client.

If this holds true, it will be a good outcome for both clients and advisers. Better value for the client was found to be the key reason for advisers allocating client funds through on platform over another in CoreData’s 2010 Investment Platform research.

Macquarie has already responded to FoFA with its ‘Consolidator Series’ of investment, super and pension accounts that exclude adviser rebates and commissions and will offer administration fees based on the total value of a client’s account, rather than the number of holdings within the portfolio.

Recent CoreData research on the FoFA reforms suggests advisers strongly support the ban on volume based payments, viewing it as a step towards greater professionalism as well as improving transparency for clients.  Some verbatim comments from respondents are below:

“Removing volume payments will improve transparency and potentially improve customer confidence.”

“Volume bonuses not paid to dealer groups – good. Banning commissions from super – good. Increasing educational requirements of planners good. One key area that was left out was distinguishing the difference for consumers in how to identify product.”

“If the industry wants to be called a profession take the medicine and cut out the volume bonuses and the tainted commissions.”

“Clearly, parts of the reforms were necessary particularly those related to volume bonuses.”

The industry tango that is set to ensue among platform providers and licensees post-FoFA could fundamentally transform the financial services industry.

One possible outcome is fast-tracked consolidation among those unable or unwilling to adapt and smaller dealer groups are the prime candidates.

From a platform perspective, consumers should benefit from the enhanced focus on price and quality, but whether this will make up for the increased cost of servicing them – likely to be passed on to the end client – is another question.