One issue that members of the Financial Planners and Insurance Advisers Association (FPIA) raised in forum sessions throughout the country recently was the threat that banks pose to their businesses.

The concerns expressed covered two issues. One is the competitive threat banks pose to their businesses, and the second is a perception that the quality of advice given by bank advisers is inferior to what an independent financial adviser (IFA) gives.

Some could interpret that as snobbery from IFAs, others laugh because many bank advisers are actually members of the FPIA. Or as ANZ's general manager advisory distribution Bruce Morison says the two are linked.

IFAs feel threatened by banks so they go around saying the advice is inferior.

Our cover story this month examines these claims to determine how big a threat, if any, the banks pose to IFAs.

One of the many interesting things about the banks is that they consider they play an important social role.

There is a view that the market is divided into three tiers, those with lots of money, the average Mum and Dad (plus kids, cat and mortgage), and those which struggle along.

The latter of these groups are highly unlikely to ever be clients of the financial planning community, rather the state will look after them. In retirement they will have to survive on the New Zealand Superannuation, which is adequate, but not generous.

At the other end are the people with lots of money. They will be able to look after themselves, and it is this group that the financial planning community have always fought over. They tend to be people without mortgages and lots of cash ($50K plus) to invest.

Then there is the middle class, Mr and Mrs Average Kiwi. This is probably the biggest group of society, yet they have been largely ignored by the financial planning community. (How many advisers out there actually sell drip-feed superannuation products to clients?)

The banks and other institutions have established models where they can deliver effective advice and products to these people at a reasonable cost, and they should be applauded for that.

What the banks are doing is little different to what many of the big, nationwide, chain-store type firms like Money Managers and Spicers are doing. The big difference is that the banks deal with every one while the advisory firms have selected niche markets.

The issue is that all the big firms use similar tools in their businesses, and there is a view they are undermining the IFA value proposition.

Any advisory business which has multiple store fronts has to have a robust intellectual processes for profiling clients, a set product suite and a templated financial planning model.

This is the way of the future as the advisory industry (profession?) consolidates. It raises a number of scenarios. Either everyone will have a McDonalds financial plan (you get exactly the same product no matter which shop you buy it from), or people will steer clear of this approach and seek advice which is individually tailored to their needs.

One of the big deciding factors will be cost. Banks essentially give away financial plans for free, thus destroying part of the IFA value proposition. Or as one bank mentioned soon they will be able to put their planning process online and anyone can do it.

Then it becomes a matter of putting the correct products into the correct holes (this is where the research houses come into play).

Clearly there are threats to the IFAs from banks and big firms. But there are also opportunities.

IFAs shouldn't be scared of the banks they should be rubbing their hands with glee, because as these clients build up wealth (admittedly a little hard to do in the current environment) they will become prime targets for IFAs.

The banks are growing IFA's future pool of potential clients. The key for IFAs is to develop a value proposition which is going to encourage a bank customer to switch to them. (But be very sure the banks will work hard to stop a migration).

Secondly, the banks have been very active recruiting advisers into the industry, and giving them appropriate skills.

One of the risks banks have is that they don't become a training ground for advisers, and see all these people pack up bags and go out on their own or work for an IFA firm.

It isn't just the banks which pose a threat to IFAs, it's any of the big firms.

Perhaps the most poignant quote is this one: "(IFAs) need to be less worried about bank advisers and more worried that the banks are doing some good strategic thinking at last."

Financial Planner of the Year Award