The Association of Independently Owned Financial Planners (AIOFP) says $20 billion of its members’ funds under advice have been pledged to a platform business it has established,  which will use two of the ‘big four’ banks for administration, but will not let them have the trusteeship, which has instead been outsourced to a company owned by Prime Super.

The executive director of the AIOFP, Peter Johnston, said dealer groups had been “stupid’ to let the ‘big four’ control trusteeship of their platforms, because the 10-12 bps flat fee they charged for it was too expensive, and the groups had no say over the menus, allowing the banks to entrench the  ‘open architecture’ model which had introduced too many investment options and too much risk.

The trustee company owned by Prime Super, CCSL, will offer the AIOFP members’ platform the institutional rate of 5 bps, Johnston said, on the understanding that $20 billion of AIOFP members’ total FUA of $40 billion had been pledged to the platform. Administration will be provided by Westpac-owned Asgard and ANZ-owned Oasis, but they will have no say in investment menu construction.

“When you’ve got 500 funds to choose from, the tail is wagging the dog because it’s very likely that dud funds will fall through the cracks. Open architecture has to end. You’ve got to control your APL [approved product list] or you risk blowing up your business,” Johnston said, adding that dealer groups would receive a discount on their professional indemnity insurance if they signed up to the platform’s APL.

The platform that AIOFP’s members will own, PCM Private, will have a maximum of 150 investment options, Johnston said, with roughly 120 selected by Mercer Investment Consulting, and 30 by Rob McGregor, an independent research analyst who used to run research at Morningstar. Direct equity advice will be provided by Goldman Sachs JBWere and Morgan Stanley SmithBarney. These research inputs will form part of a Filtered Research Committee, chaired by McGregor, which will charge AIOFP-affiliated advisors $950 per head to access the APL it produces.

Johnston claimed this arrangement was cheaper than buying research from the main retail ratings agencies, because Mercer and McGregor were working for a flat fee, and did not take money from product providers.

It was a paid-for report from Aegis Equities Research on the Alpha Strategic Fund which helped land many AIOFP dealer groups in trouble last year.

Leave a comment