National adviser business cooperative, Wealthpoint, has slashed member costs as the group looks to build further scale in the lead-up to full licensing across the industry.
Wealthpoint chief, Simon Manning, told members last week that the group would pass on more revenue to adviser businesses under revised commission terms.
Manning said Wealthpoint, which serves as the Financial Advice Provider (FAP) for about 50 independently owned advisory firms, would cut its “retention” rate – or the share of product commission kept by the central co-op entity – to under 4 per cent.
The co-op charges member annual fees to advisers and businesses as well as retaining a share of commissions earned on insurance, mortgage, investment and KiwiSaver products sold through the network.
Currently, Wealthpoint keeps just over 4 per cent of product commissions but will pare that back to under 4 per cent in a change that should see member firms collectively better-off by up to $1 million.
In a release, the group says it plans to reduce the co-op retention rate to about 3 per cent next year. Members also set to receive more commission share under a new cap on Wealthpoint-retained “financial support” from life and health insurers: any excess insurer-derived income above the cap will passed on to member businesses, the statement says.
Manning said Wealthpoint, which emerged out of the AMP NZ adviser body in 2019, now had the “real scale” to reduce member costs after the initial higher expense incurred in establishing a FAP-compliant network.
He said the group was “well-placed” to grow as the industry moves toward full FAP-licensing in 2023. The Financial Markets Authority (FMA) has set a deadline of between June and September 2022 for advisory firms to apply for a full FAP licence: as at October this year about 1,700 advice businesses were operating under the two-year transitional licensing regime introduced this March.
“We believe regulatory compliance costs have not yet been fully established across the industry and some adviser groups have some way to go in discussions with their members about how they will meet the full cost of services they provide,” Manning said.
Mark Nalder, Wealthpoint head of strategy and growth, said the group had taken on three new businesses in the last six months but expected interest to pick up as the full FAP licence deadline nears.
“We’ve seen slower growth than expected but the industry is not at full licensing yet,” he said.
While Wealthpoint advisers lean to insurance and mortgage-broking, the network also has about $4 billion in funds under management across KiwiSaver, retail investments and legacy superannuation products.
Nalder said the group has about $1.5 billion in KiwiSaver, $700 million in funds on-platform with the remainder in a slew of older AMP superannuation-style products.
Last year Wealthpoint added the Consilium platform to complement the AMP-owned WealthView as a choice for co-op members. Consilium now accounts for about $200 million of Wealthpoint platform funds.
“But WealthView still holds significant funds under management from our members,” Nalder said.
Last October Wealthpoint hired Makao Investments as an independent asset consultant, releasing five model portfolios for members this May. Keri Jenkins also joined Wealthpoint as head of investments in October 2020.