So all potential conflicted remuneration ‘arrangements’ between Australia advisers and their providers entered into prior 1st July 2013 are ‘grandfathered’.
Is this a good or bad thing?
Dunno. When I first heard yesterday I was disappointed. But, as with most things, 24 hours later my thoughts are:
- From today onwards, holidays are cancelled and weekend work is going to be the norm for business brokers, for the ‘switching’ teams within all the major banks and insurance companies, for the heads of smaller dealerships needing scale and for lawyers whose phones should be running hot from acquirers and sellers of financial planning businesses seeking certainty to the valuations being sought for transactions hopefully completed before midnight 30th June 2013. The oldco gravy train is leaving the station and no oldco’er wants to miss it!
From 1/7/2013 it will be easier to identify oldco and newco advice firms. The oldco firms will be the ones with two valuations. One for clients with pre-1/7/2013 agreements and associated on-going conflicted revenue streams and one for the new client agreements post-1/7/2013 without the conflicted revenue streams. Yes, it’s questionable that any further sale of these businesses might trigger a new ‘arrangement’, but it’s up for interpretation isn’t it (at least my reading of RG246 couldn’t clarify this)…
From 1/7/2013 it will be easier for competitors to single out the older, slower, more expensive firms that aren’t keeping up with the younger more agile pack of new-breed advisory firms that shunned conflicted remuneration offers – the gap between the two types of firms will be bigger and bigger and bigger and eventually the wolves of competition will pick off the back-of-packers resigning them to those clients so loyal, they’d jump off cliffs if their adviser told them to…
4. What about the clients? At the end of the day, it’s their money everyone is trying to make money out of. If I was a client in an ‘agreement’ that I knew was pre-1/7/2013 and my adviser was getting subsidised by the people whose product or platform he put me into, would I be happy with the ‘independence’ of that? If I found out, because I was pre-1/7/2013, I was paying a premium for his platform for him to maintain a ‘product-share’ revenue stream would I be happy? Ask yourself…
So, I reckon it is poor regulatory compromise from a regulator who still fails to understand the ramifications of their rulings, BUT long term, it’s also manna from Heaven – another fracture in our long-held oldco practices that under competitive, internet and consumer pressure will eventually buckle and die.
What do you reckon?
About Jim Stackpool
For nearly 30 years Jim has influenced, coached, and consulted to advisory firms across Australia. As founder of Certainty Advice Group, he leads a like-minded team of professional advisory firms seeking to create greater certainty for their clients. As an author, blogger, columnist, and keynote speaker, Jim is regularly called upon for his professional insights into the advice industry. His latest book Seeking Certainty is available now.