[The Wrap] What to make of changes in dealer group land

There's long being talk of rationalisation amongst the dealer groups, but to see the two big insurance groups go in quick succession wasn't something many would have predicted.

Sunday, November 22nd 2020, 2:14PM

Seeing Newpark go isn't that much of a surprise. The group has really been struggling with how to set itself up for the new licensing regime which comes into effect March next year.

What I, and others, have all said is seeing SHARE essentially take over the group is not something I would have picked in a million years. The two are chalk and cheese. A corporatised model versus one which was really a loose arrangement between the group and its member firms.

One of the things this deal highlights is that Newpark was really a group for the old regime - it was not one which fitted under the Financial Services Amendment Legislation Act (FSLAA).

While Newpark had gone down the FAP path it was a different path to the one taken by the rest of the advice world. It choose to be a FAP with no advisers. Indeed the group has been clear for a long time. I know people in high places could not understand how this model would work, and as one well-placed person suggested, under that model Newpark would be right at the top of the FMA's monitoring list.

The core of the new regime is that a FAP has to take responsibility for the advice given by its advisers. Newpark was not prepared to do that.

That is probably quite a rationale decision considering the make up and size of the group.

Clearly a factor which played a significant part in the decision by Newpark's owners, was Partners Life's FAPO move. Partners is clear that the people giving advice should be paid the override commissions. Shifting commission from the dealer groups to the advisers is the right thing in this case.

It will have been a big financial hit to Newpark, as well as a blow in other ways, as Newpark advisers were big supporters of Partners when it launched.

No doubt there is a lot more to come with this development. One upshot is that maybe a lot advisers will be looking for a new home?

We all knew the advice world was going to be different from March next year, and it will be even more different now that Newpark and Kepa, and their respective owners, have left.

My inbox will be far less entertaining, for one.

Tags: Opinion