Dealer groups Essay

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Dealer groups

Background into dealer groups.
Up until the early 1990s, financial advice was provided by various professionals such as stock and managed fund brokers and insurance agents, who incidentally also have products to sell. This origin is evident in the fact that several of the current large Personal Financial Planning organizations identified are associated with stockbroking companies, fund managers and insurance companies, hence the industry practice of referring to Personal financial Planning organizations as “dealer groups”.

The financial planning industry is predominantly structured in the form of dealer groups. Dealer groups often employ large numbers of financial planners and agree to be responsible for offering them training, licensing and support services. Dealer groups also provide financial planners with a range of support services including the management of compliance and regulatory matters, administration, provision of product research, and information technology. Affiliated dealer groups also provide their clients with access to the master trust or wrap platforms of the group with whom they are affiliated.

Dealer Groups and Financial Planning.
In Australia, individuals or business entities who wish to offer financial services as a business are required by the Corporations Act, 2001 to be a holder of an Australian Financial Services (AFS) licence. They can be licensed personally, as a director or employee of an AFS licence holder, or as an authorised representative of an AFS licence holder.

How dealer groups work.
In the Australian market, financial product manufacturers are usually large banking groups which own several parts of the value chain, including administration platforms, insurance and superannuation products, as well as a range of other investment solutions.
Apart from owning financial planning divisions that bear their name, the big players in the financial services space also own one or several dealer groups that operate under their own brands and Australian Financial Services Licenses (AFSLs).
Institution Financial Planning Dealer Group
AMP AMP Financial Planning
AXA Financial Planning
Charter Financial Planning
Genesys Wealth Advisers
Hillross Financial Services
Ipac Securities
IRIS financial Group
Jigsaw
Quadrant Securities
Rabo Financial Planning

The purpose of a dealer group is to allow aligned practices to run their businesses as efficiently as possible without all the hassles of owning an AFSL.

Nowadays most dealer groups will charge somewhere between $10,000 and $15,000 per year, per Authorized Representative (AR). A large dealer group with 100 ARs, would generate between $1,000,000 and $1,500,000 a year from these fees.

What dealer groups offer Financial Advisors
Benefit of the dealer group’s AFSL
The process of applying for and maintaining an AFSL is quite onerous. Financial planners belonging to a particular dealer group will enjoy the benefits of the AFSL maintained by the dealer group.

Compliance audit
Whilst it is up to the practice to keep their files in a compliant manner that would satisfy ASIC, it is up to the Dealer Group to provide internal annual audits of every AR. This not only protects their license but it also ensures that the clients are being advised properly.

Professional development (PD)
It is a licensing requirement that a dealer group provides enough training to allow ARs to meet the minimum ASIC requirements. At present this is 30 hours per year, divided amongst the ARs competencies. The training is normally delivered by way of Professional Development days, online training and Annual conferences.

Products and platforms
In order to meet the clients objectives, dealer groups always provide some financial products associated with insurance, mortgages, superannuation and investment. However about 80% of retail investment money in Australia enters the market through platforms. There is
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