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Banks are advisers’ number one enemy: Yeo

The biggest enemy independent financial advisers face are the banks, Grosvenor Financial Services chief executive Allan Yeo says.

Thursday, November 22nd 2012, 6:41AM 10 Comments

In his opening address to the 15th annual Grosvenor Group conference last week Yeo outlined many of the changes which have taken place in the advisory world.

Some of these related to tax, the introduction of the PIE regime, technology and regulation. However the biggest change in the past 15 years was to the face of distribution.

In the past independent financial advisers looked to firms like AMP and AXA as being the enemy.

“They are not the enemy anymore. It is the banks.”

That has changed and it is now the banks.

He says AMP has even recognised that and bought AXA so it is big enough to take in the banks.

Yeo said currently around 80% of KiwiSaver money is sitting in bank owned schemes and banks also have a major share of the insurance market, particularly through ASB and ANZ’s operations.

Yeo says advice is a relationship business, but that is one area that the banks don’t understand.

In Star Wars terms banks are the Darth Vader’s, Yeo says.

“They’re sucking up everything,”

“Our job is to say how do we counter that and stay relevant?”

Yeo said that Grosvenor’s business is centered around helping and working with financial advisers. However all advisers and related firms need to work together to battle the banks.

There are lots of guerilla battles going on in the market place and some battle victories, however everyone needs to be united to win the battle.

“There are always people fight guerilla (campaigns),” he says. “But guerillas don’t win the war.”

“One of the most important things is to unite.”

He said there are many ways firms and advisers can work together including sharing resources and strategizing ideas.

He told advisers not to see each other as competitors: “You have to see each other as allies.”

Yeo also said banks control advisers through their cheque books, most notably with commission payments.

“Independent providers need to find a way of weaning themselves off that.”

Yeo admitted that advisers and firms like his need to work with banks in some areas, but when it comes to the advice space it is a different story.

« Search engine ‘minefield’ for advisersFund managers call for level playing field »

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Comments from our readers

On 22 November 2012 at 7:56 am FiveYearBroker said:
Great article!!

The big banks are pulling all the strings around compliance and regulation too. They are easily the most powerful lobby voice in the industry, and unsurprisingly everything is getting easier for these predatory industry participants!!

How many of us have lost KiwiSaver clients who walked into the bank, got sweet talked by some attractive blonde teller into switching their KiwiSaver because of something as minor as ASB's low fees???

Are the FMA that blind to believe that tellers are not giving category one advice?? How about some mystery shops to the big banks to see what these tellers are actually saying??

On 22 November 2012 at 11:57 am Concerned Investor said:
The other advantage the banks' have is that they have the trust of the public. We know the NZ/Australian trading banks are not going to run off with our money (and if the banks have employee theft eg. Versahlko, that they will re-imburse their clients). I suspect the recent frauds by non-bank advisers like Ross, Bradley etc. are likely to make investors even more wary of dealing with non-bank advisers. Ross is an AFA as well which shows up one of the inadequacies of the new regulations. This example just shows that if an AFA wants to commit fraud they will find a way to do it. Regulation certainly didn't stop Ross. Question: is/was he an adviser or a fund manager?
On 22 November 2012 at 12:14 pm Anon said:
Lifted directly from PwC's report on RAM:

We understand that David Ross was an Authorised Financial
Advisor and through the Ross Group offered Discretionary
Investment Management Services (“DIMS”) as defined by the
Financial Advisors Act 2008.
On 22 November 2012 at 12:50 pm Independent Observer said:
From another perspective – the larger financial institutions have been very successful at developing a strategy to gather assets, whilst many of the fragmented players in the industry have been less cohesive, and as a consequence, less successful. I’m not convinced that these institutions are villains, with their efforts building a solid foundation for the industry going forward.

Looking forward - the main advantage that non aligned advisers have, is that that financial advice remains a relationship industry. As such, consumers will continue to pay a premium to receive bespoke advice from someone who adds value, and whom they trust.
On 22 November 2012 at 4:04 pm Frustrated said:
As an AFA, I have to complete numerous forms and spend time with clients placing them into KiwSaver. A bank teller, conscious that he/she gets bonuses for selling KiwiSaver which do not have to be disclosed, simply can tell a client it is easier to be with the bank, sign here. It is not a level playing field and I suggest the FMA have a crack at the bank tactics.
On 22 November 2012 at 4:29 pm MPT Heretic said:
Advisers have to stop blaming their competitors. Banks and instos are not the enemy, they are merely leveraging their competitive advantage. The advice industry's inability to articulate and deliver a value proposition to potential clients is far more of an issue.
On 22 November 2012 at 5:48 pm Stan Charles said:
Frustrated, the reality is the FMA do not want a level playing field. Would you rather be an investor with ASBs Versalko or one with David Ross?

If the small guys are driven out at least then when the next crook flogs a whole lot of life savings there is someone with deep pockets paying the client back.
On 22 November 2012 at 8:58 pm Insurance Broker said:
I love the banks. They increase the awareness of insurance products and do an average job in advice and relationship building leaving opportunities for us advisers to do a better job...
On 22 November 2012 at 10:04 pm Waterfall said:
Whether you are a financial adviser or fund manager, the banks dominate product manufacture and distribution. They have a powerful brand and can also probably do things cheaper. That doesn't mean the rest of us are stuffed. By building scale and keeping a lid on costs banks must "commoditise" their offering. They don't want to drop the ball so are likely to stay mainstream in their approach. That leaves opportunity for advisers and fund managers who are prepared to do things a little differently - have a nimble approach to approving product, look at wider asset classes, think about currency impacts, be more bespoke for each client, understand what the underlying portfolio risks really are and articulate this to clients... When I look at the banks I see large and tough competitors but I also see opportunity...
On 23 November 2012 at 10:21 pm Murray X said:
Do you not think the No. 1 enemy of Adviser's is actually yourself?

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