Adviser Firm Offers Options on Client Ownership

When an independent adviser chooses to leave Wellington-based DUX Financial Services, they can take their clients with them.

Alan Borthwick, one of two directors at the firm, is among those who prefer that advisers keep their clients when they choose to move on – because policyholders have a relationship with the adviser – not the firm.

The company, which was launched by Borthwick in 2010, has two options when it comes to IFAs working with the firm.

Option 1

If a ‘commission split’ adviser leaves the firm, the adviser can pay a pre-agreed fee to retain the clients they attracted while working there. This fee covers buying the firm’s share of the adviser’s renewals split.

“If it’s in the first two years it will be a higher price as we’ve normally made a loss at that point,” says Borthwick. “But the price is defined in the contract, so there are no shocks for the adviser.”

He says advisers don’t have to come up with a lot of money at once “…as we can take a share of the renewals for the remainder of the contract”.

Option 2

The other type of contract his firm offers – a fixed fee – may be more appealing to an adviser who arrives with their own client list.

“If we have no ownership of an adviser’s list then they are free to retain it should they leave,” he says.

“And there is a different model for how we do the pricing in this scenario – usually a fixed fee for being part of our group.”

…Clients may know our firm by name, but their relationship is with the advisers…

Borthwick prefers not to have clients on the firm’s books with whom it doesn’t have a relationship.

“Clients may know our firm by name, but their relationship is with the advisers,” he says.

“Something I learned years ago is that the brand can be all well and good, but the client knows the adviser. And financial advisers who work with us know this upfront. It gives them peace of mind.”

Borthwick says he’s not banking the firm’s future on the residuals of advisers who have moved on.

“I don’t want that kind of business, to be honest,” he says. “I only want advisers here who want to work with us. I don’t want them to feel trapped into staying when they’d rather work somewhere else.”

Borthwick says that during the last couple of years advisers have generally stayed put. But now the new financial advice regime is in place, he says many may start to consider their options.

“The trouble for many is that they are locked in, and risk losing their income and client list if they jump ship,” he says. “There are plenty of advisers who’d like to explore new opportunities, but for many the cost is too high.”

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