FOR IMMEDIATE RELEASE: 25 JUNE 2018
Adviser Ratings Pty Ltd
0413 614 640
500 New Advice Licensees Too Many For Regulators In a Post-Dover World
Sydney, NSW: ASIC’s recent action on Dover Financial Advisers signals a more assertive stance towards misadventure by advice licensees. The traditional warning and staged remediation process may be used more sparingly in favour of immediate action from an impatient regulator seeking to tackle areas of greatest concern. The Top 20 licensees comprising advisers with a history of licensee switching and low educational levels, and the Top 20 fastest growing licensees, could be singled out as high-risk groups requiring further scrutiny. The 500 “micro” licensees established in the last three years, and the licensing approval process that pumps them out, could also be under the spotlight. These are the key findings from the latest Adviser Ratings research report that asks, “Where will ASIC look next?”.
“Financial advice licensees are on notice like never before following the Royal Commission” said Adviser Ratings CEO Wealth Mark Hoven. “The apparent strong-arming of Dover to shut down without a formal warning could be the advent of a new era of ASIC surveillance and enforcement. This coincides with an extraordinary period of massive adviser losses from the industry combined with accelerating adviser switches between licensees, putting further strain on advice processes and compliance systems that are struggling to maintain the status quo.”
The greatest instances of poor advice outcomes came from licensees with advisers who have switched between multiple licensees and have low educational levels relative to Financial Adviser Standards and Ethics Authority (FASEA). “These two measures can be helpful from an external view to monitor for potential future problem areas while also identifying those businesses needing some heavy lifting to raise education levels and reduce further licensee shopping by their advisers”, said Hoven. “We identified Dover in advance of its shutdown as a Top 20 highest assessed risk licensee because it scored highly on these two measures, despite not attracting an EU or specific license conditions, at least publicly.”
Red flags are also warranted for the Top 20 fastest growing licensees. Rapid growth can bring down the very best firms if business processes and organisational governance are not scaled properly. The two fastest growing advice licensees are SMSF Advisers Network (3-year growth of 6808%) and Merit Wealth (550%). Both were established to accommodate accountants transitioning to limited licenses and both are now faced with the same challenges troubling the major banks, AMP and IOOF in oversighting large nationally distributed networks. The Top 20 fastest growing licensees also concerningly feature five of the Top 20 highest assessed risk licensees, including Dover.
Another emerging hotspot is the micro self-licensed practice. “In the last three years, we have seen almost 500 licensees approved by ASIC. These licensees are small businesses averaging less than three advisers and seven years of experience. At a time when escalating license-to-operate obligations are putting further strain on running a compliant advice business and raising the cost of advice, these small businesses may yet prove to be an anachronism, despite calls from parts of the industry to remove the licensee intermediary body and establish direct licensing of professional advisers,” said Hoven. “These micro-licensees will also present logistical challenges for the regulator if it intends to step-up site visits and inspections as previously signalled, with 20% of them domiciled in regional areas”.
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About the 2018 Financial Advice Landscape report
The Landscape report is the most comprehensive snapshot of the financial advice industry and provides a unique view of the advice ecosystem in 59 regions across Australia. The report incorporates Adviser Ratings’ proprietary data, census data, and results from an online survey conducted in Nov-Dec 2017 responded to by 1,103 financial advisers.
About Adviser Ratings
Adviser Ratings launched in October 2014, in the wake of the Future of Financial Advice reforms (FOFA), the Financial System Inquiry (FSI) and financial planning scandals of the time. Adviser Ratings’ vision is to improve the penetration of advice amongst Australian consumers. There are more than 24,000 financial advisers on its independent platform, enabling consumers to browse and search for an adviser suited to their needs, rated and reviewed by other consumers. Adviser Ratings has evolved into a data and technology company providing services to the wealth management industry including advice licensees, super funds, life insurers, fund managers, investment platforms and software providers.
For more information, visit http://www.adviserratings.com.au
FOR MORE INFORMATION
Mark Hoven | CEO of Wealth | Adviser Ratings
0413 614 640