R.I.P. Dealer Groups – the rise and fall

R.I.P. Dealer Groups – the rise and fall

The Rise and Fall of Financial Planning

Dealer Groups in Australia

The 1990’s was effectively the dawn of Financial Planning as a distribution mechanism in the Financial Services / Product sector leading to the commencement of the Dealer Group model.

In this article we briefly explore some key factors in the rise and fall of the Dealer Group model in Australian Financial Planning.

How it all started, how it thrived and the subsequent events that led to the downfall of the model.

Recruit 2 Advice - Financial Planning Recruitment - R.I.P Dealer Groups
Dugald Braithwaite - Recruit 2 Advice - Financial Planning Recruitment

Dugald Braithwaite

Principal | 25 Years Experience

Since 1998 Dugald has delivered Management Consulting Services to the Financial Planning Industry.

Experience extends to supporting local & international wealth management clients with executive search, strategy, board reporting and large scale project execution.

The Rise and Fall of Dealer Groups

Several key factors set the tone:

  • Administration of the Superannuation Guarantee
  • *Onset of Managed Funds as a Retirement Savings Vehicle
  • The establishment of Dealer Groups Licensees with sub Authorised Representatives (AR/CAR’s)
  • Distribution via Dealer Groups as the ‘Return on Investment’ (ROI) for Product Providers

The investment and infrastructure into systems and processes required to manage Superannuation, Managed Funds and related Investment products, plus the establishment of Dealer Groups to provide front line relationship managers ‘Financial Advisers’ was a costly exercise.

Focussing purely on the expense of managing Financial Planning Dealer Groups, the model was effectively a loss leader for product providers. One large multi-license product provider in the early to mid 2000’s was losing $7m per annum running the licensee services Dealer Groups.

These expenses included ASIC Licensing Costs, Training & Education for Financial Advisers, Technical Services, Paraplanning, Management, and Practice Managers to oversee operations and guide Advisers.

These overhead expenses were recouped by the product sales of the ‘tied’ distribution arm, being the AR’s associated with the licenses. This vertically integrated model allowed for the establishment of Dealer Groups, (include Banks) and the rapid growth of the Financial Planning industry for two decades.

Profitability was driven by growth and the number of Financial Advisers in the tied distribution network. One of the big four banks utilising R2A recruitment services in the mid 2000’s informed us directly that growth in Adviser numbers was the only factor restricting their profit.

Growth and the Dealer Group model was all driven by vertically integrated product models. Product sales being the ROI of running a Dealer Group.

This came crashing down with the Royal Commission in 2017.

The death knell for Dealer Groups was the Commissions findings on ‘best interest duties’ relative to vertical integration and the public backlash that a Financial Adviser may be influenced by a commission or reward for recommending one product (typically in-house) against another potentially more favourable third party product for the client.

Shock horror! The Bridgestone tyre centre sells Bridgestone tyres.

By removing product sales from Dealer Groups tied distribution, the loss leader became defunct and intrinsically broke the relationship with ROI.

The Dealer Group model was effectively killed off by dislocating advice from product.

So where to next for large Dealer Groups?

Well nowhere, it’s an unprofitable business model.

All the major Banks and Institutions with an AFLS Dealer Group (barring a few) threw in the towel and dis-banded, sold off, and in general got out of running Licensee services that are extremely expensive, when there is no product ROI eventuating to offset losses.

To put an exclamation mark against this – R.I.P Dealer Groups.

It should be noted that reputational damage, legal risks and costly remediation programs also played a major part.

Current market activity points to further evidence of the ineffective model of product and tied distribution (Dealer Group model), with Insignia (IOOF) in the final stages of the cycle divesting from external Licensee services.

This has not entirely abated the need for Licensee services because the market still needs Financial Advisers and Advice Practices to meet demand. But the market has pivoted and the rise and subsequent fall of the Dealer Group model in Financial Planning in Australia has played out.

The emergence of a new business model for AFSL Licensee services.

Our recent interview with Matthew Brown, Executive General Manager Advice with ASFL’s Personal Financial Services, sheds some light on this pivot away from the traditional Dealer Group model to Business Services providers with an AFSL.

Insights from industry leaders. Matthew Brown, Executive General Manager of Advice with Personal Financial Services

In our next article we review this pivot and how AFSL’s are forging a new identity.

You may also wish to read:

 A brief history of the Financial Planning Industry and Dealer Groups in Australia.


I often wonder whether the entities driving the politically charged RC were aware of the ‘shift’ in the entire structure of the industry and resulting seismic tremors and craters that completely disrupted the industry business model (Dealer Groups).

The effects of this in ‘part’ plus FASEA has seen Financial Adviser numbers drop in Australia to circa 15,500 from a high of around 26,500. A loss of 10,000 Financial Advisers, each capable of managing around 150 clients per year, simply put means around 1.5 million Australian no longer have access to Financial Advice.

It will take a decade at minimum to restore this back to being close to where it was. Yes, I’m sure robo-advice and AI will play a part in Financial Planning, but we’re referring to face to face relationship managed Financial advice with annual reviews and constant monitoring of the client’s circumstances.


**The onset of Managed Funds as a Retirement savings vehicle to divert funds from just cash term deposits in Australia during the late 1980’s and 1990’s.

“Another key part of this picture is the role of the investment adviser, with growth in ‘wealth management’, financial planning and investment advisory services (and their penetration into the suburbs and into the retail banking suite) both the cause and the result of the growth of the managed funds sector after 1980”

Fifty Years of Managed Funds in Australia

AFSL Licensing Guide Series:

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