So, they’ve brought in First Point to make this assessment and when a client is deemed a poor fit, the advisor is free to refer that client to First Point in return for an ongoing 35 basis points on the annual revenue derived from assets moved over, substantially higher than what First Point pays to other advisors making referrals.
“Those clients that are below the minimum, what do they do with them? They typically refer them away,” Marty Bicknell, chief executive of Mariner Holdings, the parent of First Point told the Investment News. “This gives advisory firms the ability to have incremental revenue stream from something they're already doing.”
Here in Canada the options that exist for advisors such as the one mentioned in the beginning of this article are relatively few. It’s possible that robo-advisors could breach the gap but many advisors likely would bristle at the thought of opening Pandora’s Box. As we move closer to July 2016 this problem is only going to become more acute.
Solutions? We’d love to hear them.