Nobody likes a know-it-all and, admittedly, journalists can often overdo the smugness when they’re right (yours truly firmly included). But you could forgive the editorial team at ifa for just a wee bit of sanctimony when we first learnt (officially) that Suncorp was getting out of the dealer group business.
Over the past two years, ifa has publicly predicted on numerous occasions that the game is largely over for institutionally-owned licensing.
The Commonwealth Bank’s various scandals and the monumental closure of AMP’s Genesys have already provided evidence that the era of consolidation and acquisition of licensees by the banks was backfiring – an expensive experiment out of touch with consumers, advisers and shareholders.
Last month, Queensland’s iconic bank and insurer announced it was cutting loose its Guardian Advice and Suncorp FP entities, following a number of conditions placed on Guardian’s AFSL by the corporate regulator. Suncorp was – as institutions are – fairly tight-lipped about the strategic decision-making behind the move.
It is no secret that licensing is hardly the most profitable of endeavours, and economics likely played a role. But given ASIC’s concerns following its investigation of Suncorp’s channels, there may also have been an element of pre-emptive strike implicit in the decision.
Whatever its reasons, the bank will now focus more closely on the burgeoning IFA market and no doubt its advisers, customers and shareholders will benefit from the bold – if slightly embarrassed – re-positioning.
The decision’s significance lies not so much in what it says about Suncorp but in its usefulness as a barometer of the mood inside the high-rise wealth management boardrooms.
Suncorp’s bosses are unlikely to be the only distribution strategists agonisingly mulling the fate of their – once prized and lauded – former acquisitions.
It is difficult to imagine just how inaccurately the institutions misread the tea leaves.
Just a few years ago, hundreds of millions of dollars were spent on new “distribution channels” and countless more millions (in shareholder money) on integration.
Fundamentally, the so-called business leaders who signed off on the acquisition cheques underestimated and misjudged the advice profession.
They gambled that advisers would continue to shut up and take their medicine and act as a pliable salesforce for the movement of in-house financial products.
And yet, at the very same time that deals were being made to turn advisers into salesmen, advisers themselves were upskilling, organising and professionalising in numbers never seen before.
Eventually, thanks to the tireless efforts of advisers who refused to let their professionalism be compromised – such as the group within Genesys that pushed management to the limits – the levees broke and that is what we are now seeing and will probably continue to see.
While this is ultimately a positive for the industry, Suncorp’s decision also puts many advisers in an uncomfortable position, with hundreds now having to take time out of their business to make a forced licensing decision (a scenario many readers will already be familiar with).
No doubt rival institutions that refuse to admit the independent revolution is underway will continue with the chequebook diplomacy that has landed dealer groups in this mess in the first place – as one prominent bank did in the aftermath of Genesys’ demise.
Guardian and Suncorp FP advisers face a stark and familiar choice: take the insto money and, most likely, find themselves in this position again soon, or apply for an AFSL or join a smaller, innovative, non-aligned group. This path is arguably the more difficult and expensive, but recent history suggests it is also the most future-proof.
Of course, those advisers may be ill-inclined to take advice from a smug and penniless journalist.
But sometimes, just sometimes, the pundits get it right.
Aleks Vickovich is contributing editor at ifa based in Washington, DC.
