AFS board given alternative plan

06-Mar-2013

By Krystine Lumanta

Email Article Print Article

Related Articles: | |

The Australian Financial Services Group (AFS) board was presented with an alternative business plan by its former managing director that could have helped the dealer group continue its growth and not left it teetering on the verge of collapse, financialobsever has learned.

It is understood the plan, devised by ex-managing director and group chief executive Peter Daly before his departure from the group in May last year, was rejected, and AFS is now facing insolvency.

Commenting on whether AFS was facing financial difficulties prior to his departure, Daly said like every other dealer group, it experienced the aftermath of the global financial crisis and faced multiple challenges.

“There was an alternative plan presented by management, led by me,” he told financialobserver.

“Had the board continued with that plan, then maybe they would not be facing the dilemma they’re in now.

“They were warned of the consequences should they not follow the [plan].”

News of AFS’s financial woes comes just months after fellow licensee AAA Financial Intelligence called in administrators.

Business broker Kenyon Partners chief executive Paul Tynan said recent discussions about financial planning practice sales indicated compliance and professional indemnity costs were becoming a financial burden for some.

“There’s still a very good appetite for people to buy businesses out there in the marketplace,” Tynan told financialobserver.

“But what the Future of Financial Advice reforms have done is really hurt those medium-sized businesses, with 200 advisers being on the larger end, who have structured themselves around volume bonuses, platform fees and product sales, and they didn’t price their services correctly.

“They are really struggling. They won’t survive.”

He said the industry had yet to work out the costs involved in running and sustaining a financial planning business in the future.

Investment Trends senior analyst Recep Peker said the estimated cost of providing advice, including overheads, was falling due to efficiency.

“According to the April 2012 “Planner Business Model Report”, the average adviser was estimating the breakeven cost of providing full advice to a typical client to be $2350,” Peker said.

“In 2011, it used to be $2550 and in 2010 it was $2600, so advisers are becoming more efficient in their practices.”

He said the main areas of adviser concern involving costs were the administration burden of opt-in and annual fee disclosure statements.

Calls to AFS chairman Barry Stephen were not returned in time for financialobserver’s deadline.

« Back to Articles