Non-aligned advice to thrive post royal commission

According to analysis from Cerulli Associates, a key source of the problems being considered by the royal commission is that the big four banks have expanded far beyond deposit taking and lending into different parts of wealth management.

It cited the interim report that said all four major banks are vertically integrated in that they “manufacture and sell financial products while, at the same time, advising clients which products to use or buy”.

Another likely outcome of the royal commission, according to Cerulli, is downwards pressure on platform fees, with platform operators maybe trying to pass some of the burden onto asset managers who distribute funds through their platforms.

“The interim report suggests that the vertical integration of the banks and other large financial institutions have suppressed competitive pressures for platform operators, which tend to charge clients according to the size of the assets under administration,” Cerulli said.

“Consequently, clients end up paying more for platform services than other providers would charge for the same services.”

Cerulli also said there will continue to be considerable opportunities for asset managers focusing on distribution channels that do not involve advisers at all.

“These include segregated mandates from not-for-profit industry super funds, such AustralianSuper, and public-sector funds,” Cerulli said.

“In the meantime, the demographics of Australia and the rise in the superannuation guarantee levy over time should boost the pool of super assets available to asset managers.”

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].