Intelligence is the ability to change

In an era of unprecedented changes in the history of NZ financial services, nothing is immune from the impact of those changes.

The provision of financial services has been under scrutiny globally, with all jurisdictions introducing regulatory regimes of varying degrees of intrusion, supervision, and oversight.

In the grand scheme of things, NZ has a comparatively collaborative and consensual regime, which may raise a few eyebrows to those subject to the new regime, but our experience is immeasurably better than most, if not all, of our overseas counterparts.

The area which has been consistently under the microscope is the role of financial advisers in the community. This examination covers every aspect of the adviser function from compensation to disclosure, from professional qualifications to organisational and managerial structures.

It is the development and evolution of such managerial structures that is the subject of this piece.

From the initial acceptance of production aggregation among a group of loosely aligned advisers, a number of shapes, structures, and strategies have evolved. In turn, these range from salaried shareholding advisers, to stand-alone brand-owners aiming to maintain their own business status and identity.

All of these organisations are facing crucial decisions in the months ahead, after the full extent of the new regime is made public. This is unlikely to be clear until the publication of the Code of Conduct which is intended to apply to all client-facing individuals, irrespective of their employment status.

Dealer Groups and other adviser distribution organisations will have to decide on the type of organisation they wish to present for consideration by the regulator, if indeed the decision to be regulated is favoured.

Evolution in business is inevitable and the external changes represented by legislative measures and market conditions will undoubtedly give rise to an increased number of variations in those organisations. 

From an adviser perspective, the recent presentation from the FMA - The Changing Face of Financial Advice - seeks to assist advisers find their place in the licensing process and to give thought to defining what kind of business or function they are best suited for in the new environment.

No doubt some will opt to take the opportunity to leave the industry, while others will prefer the safety of institutional life. The option to become a Nominated Representative operating under an entity license will appeal to those who wish to be guided in their compliance requirements, or who wish to have their own licensed entity that adopt suitably compliant processes (although direct responsibility as a Financial Adviser may be the preferred route to compliance). 

For brand-owners seeking to maintain and grow their enterprise, the next generation of distribution organisations are emerging as an interesting alternative. The new-style enterprise will be more akin to a network of like-minded entities and won't suit everyone, but for those who are attracted, I'd suggest that the following aspects might appeal to brand-owners; 

  • To control their own market position, identity, and destiny in a licensed environment 
  • To lift their earnings without passing higher costs on to their clients  
  • To seek experienced, practical development and assistance
  • To access extensive tools, templates, and resources to personalise their presentation material
  • To secure pragmatic business benefits that present real and tangible value 
  • To plug into a direct-to-consumer online product solutions 
  • To have influence over who comes into the network
  • To be doing business with Employers & their staff 
  • To have access to unique group insurance business products and marketing services
  • To be independent business owners

These are by no means the only characteristics of the next generation distribution entities but those that succeed will displaysome or all of these aspects as brand-owners seek to maintain their independent existence in the evolving financial services environment.

Contact 021 40 67 67 for further discussion.

David Whyte