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Dealer groups join

One of the worst-kept secrets in the adviser world has now been officially confirmed.

Monday, May 26th 2014, 6:05AM 17 Comments

Dealer groups TNP and Ginger Group have annouced that they have formed “a strategic alliance.”

TNP managing director Jeff Page says the two groups have mission statements and value propositions which are already very similar.

“Both groups have developed many tools, systems and processes that enable the growth of advisers’ businesses. Under the terms of the strategic alliance, each group’s advisers will be able to take advantage of these now combined benefits.”

Page says the two groups are still “working through more details” of the merger.

The combined will have:

  • 710 advisers;
  • $37 million of annual premium income (API) written per year;
  • $365 million of funds under management;
  • $192 million of funds under management in KiwiSaver;
  • Over $100 million of in-force API.

The strategic alliance will strengthen each adviser group and give us scale, which in turn will allow us to further invest in the tools required by our adviser base to grow their businesses. It will also help increase our collective exposure, which will attract new advisers to us and the industry.

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Comments from our readers

On 26 May 2014 at 11:49 am Bay Broker said:
Is the sun setting for 'Dealer Groups'? It was not that long ago both these Dealer Groups fiercely contested the adviser space, each purporting to offer unique and world-class benefits. Certainly demonstrates advisers are looking beyond commission aggregation. Or, with (only) $100m in-force API and $37m of new API - is it being recycled (and then serves the purpose of commission aggregation)? Interesting...
On 26 May 2014 at 4:07 pm Vinnie said:
Interesting to read this announcement, cannot say I am surprised.

I seemed to recall not long ago there were dealer groups for Africa, perhaps the time has come when the value placed on these arrangements is not viewed as being very attractive anymore - really just the same offering, just packaged up a bit differently (same biscuits, slightly different wrapping).

I also would have thought that given the apparent size of the new group the numbers mentioned would have been significantly higher, particularly share of new API - averaged out that's only a little more than $50,000 API per adviser on an annualised basis!

Time will tell.
On 26 May 2014 at 6:50 pm Gavin Austin ABCompliance said:
A good result for most. I would suspect there will be some rationalization around adviser numbers. The numbers will stack up even more after this and $50k api is not a bad starting point given that a reasonable number of the AFAs associated with the new group will not write any API at all. Today AFAs recognizes that sticking to what you know best, and referring other needs to professionals who are better equipped to fulfill the needs of the client, is a better all round client care approach. There's an old industry saying that goes something like " stick to your knitting" and many advisers are seeing the benefit of doing this in the new complex world of being compliant. Less product knowledge to worry about, less research, less paperwork = more time with fewer high value clients = more professionalism = more consumer confidence. The combined resources of the Group will help deliver better outcomes for all. Apart from being part of a QFE ( which arguably doesn't always produce better outcomes for ALL parties) this is a great way forward.
On 27 May 2014 at 3:23 am billy the broker said:
Good maths Vinnie was just thinking that myself. Due to this merger I wonder what extra bells and whistles they offer to the average broker or is it done just to benefit higher management??
On 27 May 2014 at 1:45 pm Colin said:
I strongly suspect the only people to gain anything from this merger will be the owners of Ginger & TNP. The renationalisation of resources and conferences doesnt change a thing for us advisors on the ground and I suspect its just the owners hoping to improve profits. As I understand it they (the owners of each group) have all been away together on a Cruise these past few days. Who paid for that??? If thats how they intend to rationalise resources then Id rather move groups. I have no doubt that they could have saved a LOT of money and used a meeting room in one of their offices.
On 27 May 2014 at 6:29 pm billy the broker said:
Colin if you are not happy, why not jump ship (excuse the pun) and give Newpark a crack. I have heard they are totally broker driven...good luck on your decision.
On 27 May 2014 at 7:20 pm Ron flood said:
First everyone slags off at Professional Bodies (IFA recently) and now it's time to slag off at Ginger/TNP.
Colin, please, if you are currently a member of either group, please resign.
The Group does not need negative members who don't want to go on a journey of development,enrichment and empowerment, all of which this joint venture offers.

With regards being on a cruise, this was Ginger Groups annual conference and I for one enjoyed the great speakers provided. I now have a clearer vision of where I am and where I want to be, thanks to these speakers. I know my business will be better for it.

Billy, with regards jumping ship, I remind you that is not always greener on the other side. I suggest that there is no other Group in the market place that is more broker focused than the Ginger/TNP partnership.
On 28 May 2014 at 9:06 am billy the broker said:
Ron..was just offering Colin the option, and in no way shape or form was I trying to degenerate TNP/Ginger group. I'm sure they do a fine job. But as you know us brokers are a hard type to please all the time.
On 28 May 2014 at 10:03 am David Whyte said:
As Ginger Group's first CEO, I'm very pleased to see this development - it's good for the industry, good for the membership(s), and yes, good for the founders/directors of both organisations.

There will always be some who look for the negative aspects, or who are envious of those who have the foresight, imagination, and vision to embark on journeys as did the founding parties of Ginger Group and TNP.

Faced with the growing influence of institutional offers to AFAs and RFAs, it makes perfect commercial sense for an alliance of this nature to be contemplated. Susan Edmunds article in Asset Magazine this month - "Changing Face of Adviser Force" - is an important contribution to understanding the evolution of the changing market and regulated industry for advisers. Compulsory reading before making any comment on issues such as TNP/Ginger Group alliance.
The combined quality of I.P and personnel resources available to members of the alliance - and I make no apology for mentioning individuals such as John Commins and Dr Dave McMillan - are important resources for advisers to be able to access.

Improving the offer to members has been a foundation driver of both TNP and Ginger Group, and by developing such an alliance, this will enhance the combined entities ability to achieve that. Hopefully, the founders of both groups who had the entrepreneurial spirit and backbone to accept the risks at the outset, receive commensurately enhanced rewards. I wish my former colleagues at GG and all at TNP the best of good fortune with the new venture.
On 28 May 2014 at 12:34 pm Jeff Goldsworthy said:
Thank you Ron Flood - a common sense approach and response as always.
On 28 May 2014 at 12:45 pm Amused said:
A timely article.

Dealer Groups as most of us know have done a wonderful job at convincing the banks (especially) and insurers that they should only deal with brokers and advisers that are members of their groups. Whilst most of us are probably reasonably happy with what they do for us and our businesses it’s naive to think dealer groups like TNP/Ginger, NZFSG, Share etc. are always going to be the preferred option for independent advisers in the future especially with the way technology is advancing so fast.

The biggest threat to the future of Dealer Groups will be when the insurers (and banks) have software to enable advisers to send applications directly to them without involving a third party's software like Quote Monster etc. Meantime whilst the going is good and the insurers are paying these “dealer cuts” based on API issued each month it’s a lolly scramble for them.

Dealer Groups and their owners are primarily focused at present on the significant income stream been generated by the API that advisers write collectively each month i.e. the "dealer cut" that the insurers pay these groups. Members need to understand that dealer groups are making sizable profits off the collective API been issued each month by members businesses combined. This is something that most advisers seem "clueless" about. The insurer is thus essentially paying “twice” for the policy and this cost is ultimately met by the policyholder and the premiums our clients pay each month for their cover.
On 28 May 2014 at 4:42 pm SovNet convert said:
Amused, a timely note from you. I've recently discovered the options and offers dealing directly with insurers, as opposed to Dealer Groups. Who would have thought dealing directly with an insurer I have the option for discounted PI, ability to join their group life and trauma scheme (with AAL's), attend their conferences and monthly learning sessions, use their needs analysis tools, tap into their huge knowledge base, receive discounts on products etc etc - at the same time as receiving enhanced remuneration. (And before anyone asks, I deal with 2 primary insurers, and have a choice as to where I place my clients.)
On 29 May 2014 at 10:36 am AFA Muggins said:
I think once the industry starts maturing, advisers may realise they can have a real value proposal for clients that they can charge direct fees to clients for engagement. Fees that are not based on funds under management, and the client is happy to pay them.

There is no umbilical cord to product commissions, product suppliers, nor aggregation arrangements.

It is possible and is being done now.
On 29 May 2014 at 12:06 pm Rainmaker said:
Amused, different product manufacturers have different agreements with each Dealer Group. In general the Dealer Cut is only spectacular when there is a lot of new business with no lapses on the existing inforce. That's because the same clawback model that applies to you applies to them (actually you are worse off... but that's another story)

In general DGs business model can be broken into the following:
- new advisor low production
- new advisor high production
- old advisor high production
- old advisor low production

DGs prefer to deal with new advisors as they start off with an impressive persistency rate of 100%. All new business from them is easy money as long as they can maintain it on the books.

To get the sweet spot you need to get the production bonus but minimise the persistency penalty. But in the search of production volume persistency will often be compromised. So its like a catch 22.

What might surprise you is that DGs actually lose money on a number of advisors. So you can look at your portfolio of advisors in the same way one looks at a portfolio of shares. Some will be making money whilst others will be losing money.

On 1 June 2014 at 2:06 am billy the broker said:
Good call Rainmaker...
On 3 June 2014 at 11:43 am ScottB said:
As CEO of SHARE I immediately own up to a certain bias, but please do not make the mistake of assuming all Groups are the same. As a co-operative, SHARE is owned by our Advisers and operates on a flat fee structure. Most, if not all, of the Group over-ride that we receive from the suppliers is passed back to the adviser whose efforts generated it. The fees pay for the technology support, branding, and succession planning services that we offer.

I take nothing away from TNP, Ginger, Newpark, NZFSG or any of the other Groups that operate in the market – as long as they add value to both their members and the insurers/lenders that they deal with, then they will survive and prosper. And if that happens, then hopefully the public of NZ will be well served by increased access to professional, independent, compliant financial advice.
On 3 June 2014 at 1:01 pm Rainmaker said:
From the perspective of a product manufacturer the DGs are a necessary evil. Without a generous override new business from the advisor market will dry up due to the significant alignment of most IFAs to a DG.

There is no question that DGs hold considerable sway over the direction of where new business is heading - it's a known known.

A product manufacturer with considerable influence can control the advisor market starving its competitors of new business.

One of the biggest mistakes that product manufacturers in NZ have made is to not "own" these dealer groups. A look across the ditch shows how successful the subtle "ownership" of DGs are. The highest volume writers are DGs like Millenium3 (ANZ), Garvan FP (NAB) and Financial Wisdom (CBA)

The only DG in the top 5 writers of volume that was independent was PIS. It didn't take long to sort them out. Their last words were quite amusing ....

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