Paragem tips scales for small planners

Friday, 20 February 2009 12:55pm

Small-size planning groups keen to cut their licensing and admin costs without sacrificing their independence and quality of service are driving the demand for the ‘shared services’ model, said Paragem’s managing director Ian Knox.

Knox said some planning groups are taking a different approach to stay ahead of the pack even as the market continues to bite.

For example, Paragem has set up a new service, Paragem Wholesale AFSL, which allows advisers the option to share a ‘non-aligned licence’.

This means that they don’t have to shoulder the full cost of keeping the business compliant but, more importantly, they can tap into Paragem’s business, which allows them to provide advice without potential conflicts-of-interest normally associated with planning groups that are part of bigger firms that also manufacture investment products.

An additional feature of the group’s licensing facility is that, as part of the planning firm’s contractual agreement with Paragem, all volume-based bonuses provided by select platform groups go directly to the clients.

“We’ve undertaken agreements with a couple of platforms, Macquarie and Avanteos, where all volume rebates attributable to Paragem has to go to the client. This is about fostering and developing steps towards where the market is heading, which is advice-based activities,” he said.

Knox added that the scale advantage they provide also extends to Professional Indemnity (PI) insurance costs for each licensee. By negotiating PI insurance for one or more licensees, provided they are all high-quality businesses, the annual PI costs would come down too, he said.

In separate news, Knox said that in contrast to the doom-and-gloom stories about planning groups struggling in the current climate, Paragem saw a spike in business activity in the two months to January, when they lodged more than 20 new AFSL applications.

“This implies these practices are leaving networks to establish and run their own affairs, in many instances they actually receive a financial boost as their running costs are lower,” he said.