Why Dealer Group QFEs isn't a far-fetched idea

The concept of a DG performing as an agent of the FMA monitoring RFAs might have merit, but, the QFE model is not the way to do it.

The reason goes back to the liability on the QFE for the actions of the advisers. Such liability would require the DG/QFE to control the activities of the advisers to protect the QFE from attack for a rogue adviser. Advisers are typically independent thinkers who have rejected the controls exerted by large institutions in the employer/employee relationship and have chosen to take responsibility for their own destiny.

Whilst it might be "nice" for a QFE's members to give truly independent advice, how long before the QFE gets offered a larger clip for directing its "independent" advisers to favour one insurer over the others?

Maybe the FMA needs to use more of the fees it sucks from advisers to employ more competent staff to monitor advisers?

Phillip the thought does have merit, but as Graeme says what about the influences and the responsibility?

I'm not a Kepa member, and with the dealer group I do belong to I enjoy the freedom of not having supply contracts, with dealer group or insurers.

This isn't because I'm wayward, quite the opposite, this is to give me the independance to run my own business and not be an extension of someone else's. I'm particular about client privacy, client advice and I ensure I have robust systems and solutions to ensure I am doing the best for my clients. And my clients often comment and thank me for taking this approach, it's all in the open and more in their control.

May be that's considered to be one of the few, but I'd disagree with that, as there are many advisers of a similar mind and approach. Many more than people realise and more the 'usual' minority causing the real issues.

The dealer group's main advantage is removing a lot of commission bias as it's pretty similar across the board, I can genuinely advise on the best approach for a client and still get paid reasonably well for it. I also use providers for clients where I don't get paid too, possibly not something to do on a regular basis, but when it's right for the client it's the right thing to do.

To mix remuneration and compliance in the same system is asking for trouble. As Graeme has mentioned, though on that note, it's already there. The different providers pay the dealer groups different rem, and it does show with the balance of business placed by the advisers in the groups. Some groups experience different rem with similar providers than others, though this doesn't usually last and gets caught up somewhere.

If you ask any quality systems implementer, they both implement and audit quality systems, but the implementer cannot audit their own implementation. The very same should apply here.

Industry bodies have found themselves a bit adrift in the new world we are in. We have the requirement to be part of a DRS, why not also require industry body association too? No association, no advising.

In this way dealer groups can focus on what they do best, drive new business, help new advisers develop and provide the financial remuneration structure that we currently work under in a compliant way. Then we have the industry bodies involved with the oversight, industry lobbying and development that they presently provide. (Development is a cross over piece with both)

By having the industry bodies, like the PAA & IFA and others, cover the compliance and oversight we keep the incentive conflicts independant of dealer groups and insurers who are paid based on sales. Yes this is likely to spawn a new industry and increase professional body costs, things that need discussion, but it will place the growth and development of our industry in a place that is genuinely about growing the industry. Keeping in mind checks and balances about dealer groups owning industry bodies and other financial conflicts needs managing.

By having an industry body doing this work, they will gain a better picture of what is really going on and what needs to change. Because of the independence from commission and insurers, their lobbying will hold more weight than that of a dealer group, which is often looked at sideways with the where's the money in this?

Do away with QFE's completely, banks & insurer advisory staff should fall under the same rules, then we truly have a cohesive advice market on a level playing field. As has been mentioned in other posts, scrap the AFA/RFA designation and give us real titles.

We face numerous factors and challenges to our industry, keeping the comments and ideas flowing is part of improving things on this ball of mud, the 3rd rock from the sun, I hope this is food for thought, rather than flames ;)