Financial advisers unaware of extent of dealer group control, says industry professional

Speaking to ifa, Conaill Keniry, founder of What If Advice and owner of small dealer group Cobalt Advisers, explained that many advisers are unaware of the full extent of a dealer group’s control over their business.

“A dealer group controls whether you are or not on the register. A dealer group controls your revenue. A dealer group is the one that has to write the release letter for your clients,” he said.

“They can make that as easy for you or as hard for you as they like.”

According to Mr Keniry, leaving a dealer group can be a daunting experience, especially since the group wields the ability to hinder the process and potentially harm an adviser’s business.

“Whether there is or isn’t a contract in place, that doesn’t mean they can’t stall the process for three or four months,” he said. “I speak to three or four new advisers a week and I have heard some horror stories.”

Mr Keniry provided some examples of the difficulties experienced by financial advisers, citing instances where dealer groups have refused to release advisers, leaving them feeling as though they were being held hostage.

“I’ve seen dealer groups say, “You can’t buy that book of clients unless you do a joint venture with me.” And then, “well, you’re now in a joint venture so you can’t leave”, said Mr Keniry.

These, he admitted, are “pretty extreme cases”, but evidence of a power struggle is fairly common. 

“The minor cases will be things like, ‘My dealer group put my fees up. But even though we have a contract in place that then my fees are X, I can’t really do anything about it because if I complain they are the ones that are in control of my destiny’.”

While acknowledging that dealer groups have “so much risk at stake”, and need to exert some control, Mr Keniry asserted that “they’re taking this one step too far”.

A solution, he believes, starts with reframing the relationship between financial advisers and dealer groups.

“I think the biggest mind shift that advisors need to make is your dealer group is a business partner. They’re ultimately a business partner you’re getting into this relationship with,” he said.

Ultimately, Mr Keniry noted that while there are certainly benefits to being part of a dealer group, such as access to resources and support, it’s important for advisers to understand their rights and the potential risks involved.

How to choose the right dealer group?

When it comes to choosing the best-suited dealer group, Mr Keniry suggested advisers need to consider several important factors through a system of due diligence and careful evaluation.

Mr Keniry suggested a short checklist of key considerations that advisers should keep in mind, such as reviewing corporate authorised representative (CAR) agreements, talking to other advisers who are either on or off the licensee, and considering how the dealer group could impact software and planning.

He advised advisers to dig deeper into the company by talking to decision makers rather than the business development managers and to properly evaluate the potential benefits and restrictions that each dealer group may bring to their business.

To hear more from Mr Keniry, tune into our podcast from 5pm Wednesday.