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.
Regtech
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”.
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Comments6
"Just like Paulie from the 'Rocky' movies once said to his sister Adrian; "You live in a fairytale world where your hair don't move", ASIC is dreaming and so out of touch and ignorant to the total carnage they're causing this industry. They've created so much red tape and compliance fluff with their 'fantasy world' view of what advisers are expected to now do for clients (apparently all for free), that its no longer viable to even practice. So now they believe its technology that's going to save the financial services industry is it??? Yeah right, what a disgraceful organisation."
Just Had It 16:46 on 23 Aug 19
"I suppose this is one way of changing the Investment and Life Insurance sectors. Have numerous investigations and a Royal Commission. Make assumptions that all advisers are bad, bring in half baked regulations, increase the cost and risk of doing Business so it becomes a noose around advice practices necks and then tell the world that we are going to make advice a Best Interest duty world for all Australians. Sounds good in theory, though thousands of the most experienced Life advisers with exceptional skills and claims handling for their clients, will be forced to exit the Industry for what benefit? NONE. We now have a circus that is going to cause millions of Australians to be far worse off. Accountability should be a two way street. If ASIC and all Government public servants were forced to apply Best Interest Duty requirements with their own actions and were held personally liable when things go wrong, they would be outraged that such a proposal could be considered. "
Jeremy Wright 16:40 on 23 Aug 19
"Lets just get rid of licensees altogether. That's the answer. Once the Education standards are done advisers will be at a similar level to a CPA or CA or at least eventually this will be the case with new entrants. CPA's have a body they join and pay fees to etc and they are responsible for their Professional Indemnity and compliance. Licensees simply represent an inefficient leakage - they are middle men pure and simple and the industry can no longer afford them. We need to go to the same model as accountants. most advisers pay 20k plus for what ? a commission statement and an annual audit - that dog no longer hunts. get rid of it "
David Keenan 16:14 on 23 Aug 19
"I read somewhere the CBA remediation costs are up to $2.2 billion - that's more than a mill for each adviser! And AMP have 146 people currently working on their own rem with ANY effected customer getting a $400 refund with out even checking if they were offered service or bad advice or not. Seriously - if these organisations had taken a bit of time and spent a bit of money instead of flying by the seat of their pants and willfulling ignoring the problems they created and promoted - we wouldn't even need FASEA or have had a Royal Commission. CBA - over a million per adviser?!?! How blind were they?"
unbelievable malfeasance 15:42 on 23 Aug 19
"The ASIC reg tech solutions are years away. they are just starting to investigate them now. any solutions that gain efficiency will cost a bomb and this wont save adviser struggling with cost now. Maybe for the future."
Too late 15:33 on 23 Aug 19
"How is an adviser meant to wade through the hundreds of licensees to find the right one. Some much change happening its hard to find a still target."
Adam J 15:12 on 23 Aug 19