MLC Advice Solutions is reviewing its buyer of last resort (BOLR) program following last week’s release of the FPA’s Principles for Managing Conflicts of Interest.
All existing contracts between MLC and MLC-aligned self-employed planners stand, but any future BOLR agreements will be structured differently in accordance with the FPA’s new principles, Matt Lawler, head of MLC Advice Solutions said. Under MLC’s previous terms, BOLR was determined, in part, by support and volume of business in MLC products and platforms, but the offer will be evolved to “remove bias”, Lawler said. “Existing contracts will be grandfathered because they were done sometime ago but new contracts will be restructured. The FPA principles have provided an opportunity for us to evolve our offer,” he said. Details of the new BOLR program will be finalised an released by July 1, 2006, and will involve consultation with the representative bodies of MLC-owned dealers including Godfrey Pembroke, Garvan, Apogee and MLC Financial Planning. “The current arrangement, which involves an extra multiple based on business with MLC, is logical commercially but if it extracts from the trust the community has in financial planners then that has to be addressed and that is what the conflict of interest principals is based on,” Lawler said. Only a dozen or so of MLC’s BOLR agreements have been exercised in the last decade, and the impact on MLC has been “small”. Over the last few years MLC has worked hard to remove any real or perceived conflicts of interest within its business such as volume bonuses and reduced dealer splits in return for greater support. The changes have had some impact on the group’s business. “When you’re one of the only ones in the market doing it, it’s difficult but now they’ll be a more level playing field. One group isn’t traded off against another,” Lawler said. The launch of MLC’s new and innovative fee for service platform MasterKey Fundamentals last week has renewed the ‘fees versus commissions’ debate. The industry has play down the fees debate, putting forward a convincing case for choice as long as there is transparency and disclosure, but the launch of MasterKey Fundamentals, which does not pay commissions to advisers, has sparked renewed discussion. According to Steve Tucker, MLC chief, more than 3,000 advisers who choose to use MLC solutions have charged a fee for service and more than 30 per cent of MLC’s business during 2005 came from advisers using a fee for service model. That number is set to soar this year. “The debate surround fees and commissions has been around for years and there’ll be a lot more discussion about it in the next 12 months. “There are some people who would prefer not to talk about it but we should be discussing these issues,” Tucker said.
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