The break-up and restructure of the large institutionally aligned advice networks is continuing to create an uncertain landscape for thousands of advisers who are looking to consolidate their place in the advice market. Some licensees will likely benefit and grow as advisers look for new homes, but most advisers will be unfamiliar with their costs and provision of services – particularly as licensees are continually renovating their offerings in light of the changing regulatory environment. Meanwhile ASIC is actively advocating for technological solutions to the compliance burden facing the industry in the latest edition of its regulatory technology (RegTech) symposium.
Looking at recent announcements, it’s easy to conclude the future outlook of the advice landscape is anything but certain. CBA have announced that Financial Wisdom will be done by mid next year, AMP is expecting to shed 30% (or more?) of its advisers, notwithstanding it’s restructuring plans including BOLR adjustments have thrown hundreds of it’s aligned practices into turmoil and MLC have outlined the closure of its self-employed NAB Financial Planning and MLC Advice Stores, along with a change in the way it charges for licensing. Consolidation of MLC’s three largest dealer groups will include an unbundled support and fee structure model supplemented by specialist professional services that are charged individually.
The entire industry is grappling with restructuring, new regulations and compliance – along with a cashed-up regulator looking to smack down any group who is not prepared to step into line. Treasurer Frydenberg has recently told ASIC to monitor the transition of planners and planning groups away from grandfathered remuneration.
"Known Unknowns" For Advisers
Our Musical Chairs Q2 report identified a movement of switching advisers towards larger (30+) independently owned licensees. Speaking to those involved it was apparent that many advisers had underestimated the amount of subsidy/support that they were receiving at their previous licensee. This point was echoed by Centrepoint chief Angus Benbow speaking to Money Management, who said where some advisers had been operating in the subsidised service environment of the major institutions, they were unlikely to fully appreciate the un-subsidised costs associated with dealer group services. Benbow said the exit of the banks had “created opportunities for Centrepoint because it was one of the few scale players”.
Centrepoint, like many other dealer groups, is currently moving their service offering and the fees that they charge to a more “contemporary model”, but advisers, it seems, need help and guidance around the changes to offerings. Adviser Ratings is receiving inquiries on a daily basis from advisers looking for any insight into licensees. The common refrain from advisers is that they are looking to change their AFSL because fees are going up and service is going down.
At present, we’re are not in a position to offer any guidance, apart from suggesting advisers reach out to their networks, and also just contact licensees with a clear set of questions – a potentially time-consuming process in and of itself. We hope to be able to share more insight with advisers when our licensee ratings system makes available its initial results – planned for in the first half of next year. We are currently in the process of mapping every adviser on the Financial Advisers Register to FASEA, and components of the rating system are being evaluated, back tested and presented to beta-licensees for feedback.
Meanwhile, ASIC is actively promoting the potential of technology to ease the increased compliance and regulatory burden faced by the industry. Speaking at ASIC’s latest Regtech Symposium, ASIC Deputy Chair Daniel Crennan said that technology’s potential was becoming more obvious and “we do expect financial services organisations to keep up”.
One of the aims of the event is to showcase new technologies to help advisers and entities meet their regulatory requirements. Crennan said the status quo is no longer an option. ASIC said “in order to improve risk-management and minimise your compliance risks, you must include the capacity to explore, test, and implement ‘compliance-by-design’ regtech solutions within your business model”.
In his opening statement at the symposium, the Deputy Director said that although the future in unclear in the regtech space at present, and that the industry was engaging in a learning exercise, “none of us can doubt that technology is front-and-centre of financial services provision”.