Self-registration proposal ‘a relief’ for licensees

Lifespan Financial Planning chief executive Eugene Ardino told ifa the FPA’s recent proposal to move to individual registration of advisers could be beneficial for dealer groups in allowing them to focus on being a service provider for practitioners, but was unlikely to have a significant impact on the cost of doing business for individual advisers.

“If you turned around and said ‘you don't have to take responsibility for advisers anymore but you can service them and they'll have another mechanism to be registered’, that doesn't worry me too much – in some ways it would be a relief,” Mr Ardino said.

“The reality is if you remove licensees you are going to have to bring in some other layer of oversight. Those who say we’re a duplicate layer of oversight, I don’t think they understand the difference between how ASIC and licensees regulate – licensees resource and report at a much closer level to the advisers than ASIC do.”

Mr Ardino said the current monitoring requirements of licensees, which provided an essential second layer of supervision to the industry relied on by ASIC, would need to be replicated in any change of the current licensing structure.

“ASIC bans scores of people every year, but they’re trying to get to the really big problems that result in banning – licensees are doing it at a more detailed and closer level with a view to improving advice quality,” he said.

“That’s the regulatory side of it but that’s not the side of our business that is the most profitable or the most pleasurable, the side of the business that advisers would be inclined to want to pay for is the benefits we provide in terms of aggregation and services that are difficult to access.

“The other component of that is who takes liability if there are losses – as a licensee I would love a framework that put that responsibility on the individual adviser, it would make my life easier, but the reality is having that licensee there to be the first point of contact to meet that liability adds another level of protection for consumers.

“If the government is prepared to provide a limited liability scheme, great, but I don’t know in reality if that is going to work.”

Mr Ardino said such a change was unlikely to get to the root cause of rising costs in the industry, which were due to the time taken to produce a piece of advice.

“If you talk to enough advisers you’ll learn that to bring on a new client is somewhere between 20 and 40 hours if you go through the process properly, [so] the cost of advice is higher than what advisers are charging,” he said.

“As funding mechanisms such as commissions disappear and more difficulty surrounds ongoing fee arrangements, you will see what’s being charged start to get up to what it actually costs as advisers want to recover more time.

“You might be able to tweak the registration framework to make that a bit less onerous but that will give you a drop of 5 per cent – what we need is to drop the cost of advice by 30 per cent, and the only way to do that is to reduce the red tape involved in the provision of advice.”