MLC advisers should put costs first: Licensee head

Annick Donat, chief executive of the Clime-owned Madison Financial Group, said while many MLC practices were “arguing the toss on price” when deciding whether to stay with IOOF or move to a non-aligned dealer group, this was ultimately a positive for the industry as it meant advisers were “back in the driver’s seat” when it came to running their business.

“I’ve had those conversations [with advisers] and I take a breath and think it’s about time,” Ms Donat said. 

“It’s about time the adviser realised they are in the power seat – they’ve realised the only important relationship is between them and their client because frankly it hasn’t been that way for a long time.”

The comments come following recent remarks by Sequoia Financial Group managing director Garry Crole that outgoing MLC advisers were choosing to stay with IOOF for the most part because of “uncommercial” fee reductions being offered by the institution.

However, Ms Donat defended the advisers’ decision to put costs first in choosing a new dealer group, pointing to the onslaught of new industry regulation that was set to continue in 2021 at the same time as licensees sought to remove cross-subsidisation of their business costs.

“These people are struggling to deliver advice and make a profit in some circumstances – with the amount of regulatory burden in the industry at the moment, everyone talks about it but I don’t think many people really understand it,” she said. 

“If you just take the DDO bill and the fee consent and work out what the legislation actually says and how to execute and meet that need, it’s complex. You are going to need systems and processes and to understand the legislation and whether it’s the licensee charging you or you charging your client, it all costs money.

“When advisers are negotiating fees it’s because they’ve had COVID to deal with, the costs of advice has increased, they’re worried about not having enough resources to pay staff and it’s about time they got a bit of their power back.”

With many practices currently making a forced exit from MLC and other institutions, Ms Donat said cultural fit was a more important component for Madison when choosing which advisers to bring on board. 

“I don’t have an issue with negotiating on price, because if it’s about price and you don’t deliver value you don’t deserve the client anyway. What really is important is if you don’t want to be part of something,” she said.

“We won’t have someone in our community that doesn’t want to be part of something. We’ve missed out on a few [advisers] but the one thing that’s always come back is you can tell we’re adviser led, we believe in advice. It’s a respectful relationship and we want to build something together.”