Dover collapse paints a very different future for financial planning

Dover Financial Advisers collpase financial planning Royal Commission

This week we have seen exactly the sort of future that faces the financial planning sector with the collapse of Dover Financial Advisers.

Before the Royal Commission into Financial Services began, it would have been somewhat inconceivable for one of Australia’s largest financial planning groups with more than 400 advisers and around $3 billion in funds under management to suddenly close up shop.

Now, having heard a lot of the evidence at the Commission and particularly some of that surrounding Dover and the sensational witness box collapse of Dover owner Terry McMaster, the Dover closure is much more predictable.

Witness box collapse predicted the collapse of the company

That witness box collapse and subsequent stretcher ride followed Mr McMaster’s final and crucial admission that Dover’s somewhat misnamed client protection policy actually provided more legal protection to the company than it did to its customers.

Now in the wake of an ongoing investigation by the Australian Securities and Investments Commission, Dover’s financial services licence will be cancelled by July 6.

That leaves open the very interesting question of what will happen to the many thousands of Dover clients as their advisers seek jobs with other financial planning groups.

Where will the clients and planners go?

Traditionally it was accepted that financial planners would bring the majority of their clients and their investments along with them, which has made the “top salespeople’’ very attractive to other firms.

That concept has now been turned on its head with the most attractive financial planners now being the ones with the best and strongest compliance records rather than the biggest number of clients and funds under management.

That will conceivably lead to a situation which will drive some of those leading “sales people’’ financial advisers out of the business entirely if they can’t quickly find another holder of an ASFL licence to take them under their regulatory umbrella.

It will be interesting to watch where and if those financial planners land, given that at least some of them have less than perfect compliance records over recent years, even though they may be great at signing up clients to trust them with their money.

The other side of the equation to watch will be the Dawson clients and see how “sticky’’ they are in remaining with their advisers.

Low costs the key to good financial outcomes

If there is one lesson that should have been learned from this Royal Commission it is that fees are one of very few variables that customers can control by choosing the right financial adviser or financial planning option.

Some of those options might include finding a retail or industry super fund with really low fees and other low cost financial products outside of super or even undergoing some financial education to invest independently of a planner entirely.

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