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Last waltz for the one-man-band

Increased regulatory burdens mean the clock is ticking for the one-man band advisory practice, according to Lifetime Group chief executive Warren Stephens.

Thursday, May 24th 2012, 7:15AM 6 Comments

Lifetime has, this week, acquired Wellington-based Meridian Brokers, a deal Stephens said was largely driven by the new regulatory environment.

“I really do question the viability of a sole practitioner being able to economically operate going forward,” he said.

“After July last year, the market changed and we needed to change with it. Having a larger capital base provides greater strength and financial capacity.”

Stephens said that while scale is increasingly important, there was also an increased need for a wider range of skills.

“Identifying synergies in other successful financial advisory businesses and focusing on the different skills and knowledge each can bring to a new, larger combined organisation, is the future,” he said.

“We’ve got a very much best practice model, but there’s other businesses out there working to best practices of their own and we both learn together.

“With Meridian they bring a totally new set of skills to what our existing guys do, because they’re specialists in the group market, for instance.”

Plus4 Insurance chairman Grant Uridge agreed that regulation would drive adviser consolidation - especially amongst AFAs.

“I think it’s inevitable that it does, though it depends whether you’re AFA or RFA. The RFA seems to have had an out, there’s a level of professionalism in being an AFA and the back office requirement is that much higher,” he said.

“It’s inevitable that you look to consolidate the backend at least.”

He said that so far the Financial Markets Authority (FMA) had only inspected AFAs and that when the regulator started checking RFAs, that may act as a spur to consolidation in that space.

“They [RFAs] should be operating to the principles of the Code, should be quasi-AFAs,” he said.

“I don’t think they understand that.”

« Minister tells industry FMA fees will be comfortableAdviser book values boosted by sales drought »

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Comments from our readers

On 24 May 2012 at 9:50 am Majella said:
We'll see...not sure just why Warren thinks that Lifetime offers all these fantastic benefits to clients and advisers. As far as I can tell, looking from the outside admittedly, the Lifetime adviser is just as likely to roll/churn anything existing risk business as anyone else, and large expensive offices etc simply suck revenue from adviser, who loses a great deal of control on those expenses, and at the same time potentially compromising client ownership if (or more likely when) the relationship breaks down.

On my own, I can use a large aggregator, like TNP, that offers a range of useful services that I can access as & when I wish. I have the control - thanks!
On 24 May 2012 at 10:36 am Bazz said:
Grant. The FMA have already started checking RFAs as well. The problem for RFAs is there is no rule book like the code of conduct for AFAs.
On 24 May 2012 at 3:00 pm Andrew said:
Of course Warren is going to say it's going to be tough on the small guys. He wants to buy up all the client bases of people leaving the business for cheap.
On 24 May 2012 at 3:20 pm Amused said:
I agree with Majella. The days of the one man band are alive and well thanks to aggregators like Allied Kiwi or TNP etc

The long term "economic" cost of regulation is one hand that has been well and truly overplayed by those advocating adviser consolidation. Once again we see personal agendas been pushed on here plus (another) swipe at the professionalism of RFAs.
On 25 May 2012 at 8:07 am Independent Observer said:
The sooner the industry purges itself of the vested-interest and wild statements of non-fact, the healthier it will become.

There are plenty of examples (both in NZ & further afield) of "1 man" financial advisory entities that are performing extremely well. In fact - many of these "1 man" entities are delivering a better client experience, and greater profits than some of these less gifted aggregators.
On 27 May 2012 at 9:10 am Giles Thorman said:
Can someone please explain why commentators find it necessary to spread doom and gloom at seemingly every opportunity? It seems that just around the very next corner all RFAs are going to be put of business, no-one knows why or how, but it will be because they are not complying with some unwritten rule or regulation the FMA will be compelled to enforce. We have had scaremongering for three years now; can we not try pulling in the same direction and try to make our comments a little more positive? Can the "Chief Executives" and "Chairmans" please stop pushing their agendas at the expense of the common good. A hard ask, but do try.
Commenting is closed

 

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