It was only a matter of time before Steve Tucker, the man who abolished commissions for financial planners when he was running MLC in 2004, reappeared in the financial advisory business after dropping out last year.
But his choice of former JB Were chief executive Paul Heath as CEO of their new independent advisory group Koda Capital, represents what may be a ringing of the bell on the “vertically integrated”, bank-dominated tied model of financial advice.
Koda Capital is based at Sydney’s Circular Quay and has been financed not only by its principals but also by a number of private equity investors including PE veteran Andrew Rothery, who is also a director, with lawyer Lisa Gay.
It aims to provide fee-for-service financial advice, and many of its first clients are senior executives concerned about conflicts of interest elsewhere.
Mr Tucker and Mr Heath know how that works, having been inside the model themselves. “The profit motive overcame the importance of advice to the consumer,’’ says Mr Tucker, who spent a quarter of a century at MLC before his unexplained exit in March last year, by which time MLC was a National Australia Bank subsidiary, and MLC in turn owned JB Were.
Mr Tucker, who is founder and chairman of the new outfit, is Mr Heath’s old boss.
He believes that legislative responses such as the Future of Financial Advice reforms to the likes of the Storm, CBA and Macquarie scandals in financial advice, are fighting a war that, in many ways, is already over.
“In my view the market will provide the solution,’’ he says, indicating there has been a stampede by retirement savers away from the 80 per cent of advisory businesses that are aligned with banks and major insurers, towards advisers who are more measurably independent.
In simple terms, bank ownership of advisory businesses has gone from being an asset to a liability for many planners because of the scandals and the consequent belief, correct or not, among many hitherto happy clients that the adviser may not have been acting in their best interests.
Pointing to the two iterations of FoFA, the Labor government’s original version and the Coalition’s recent failed bid to amend the legislation governing adviser behaviour, he says: “They’re trying to solve the unsolvable problem of 30 years of embedded beliefs and systems.’’
He hasn’t had a Damascene conversion so much as a boil-the-frog experience, in the central role. But unlike the apocryphal amphibian he saw the temperature was rising in the advisory business, due to dated structures and jumped out of the pot.
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