The interim findings of the Hayne royal commission found that ASIC’s emphasis on the use of banning orders “invited attention to a more basic issue about regulatory structure”.
The report asked whether advisers should be individually licensed, noting that the present regulatory structure permits holders of a financial services licence to authorise a person to provide a specified financial service or services on behalf of the licensee.
The licensee must notify ASIC of the authorisation and is responsible for the conduct of an authorised representative, and that responsibility extends to loss or damage suffered by the client.
“What is gained by having this structure? Would there be advantage in providing for the licensing of authorised representatives, thus bringing them under the direct supervision of ASIC?” the report said.
Throughout the Hayne commission’s hearings of advice, it found that licensees treated the provision of ongoing services “as a matter of no concern to them”, and that provision of those services was treated as a matter between only the client and the adviser.
“At least when an adviser left the licensee, and the client became an ‘orphan client’, the licensee knew that that adviser would not be providing ongoing services to that client,” the report said.
“But the licensees did nothing in response. They simply continued to take the money that was deducted from the client’s investments in payment of the ongoing service fee.”
The interim report also noted that advisers often treated ongoing service arrangements as though they were nothing but trail commissions for the advice that had already been given.
“The fees were both a steady source of income (for little or no effort) and an important element that would contribute to the capital value of the adviser’s business,” the report said.
“In some cases, advisers continued to charge ongoing service fees even though the client was dead and had died years earlier.
“Even in those cases, the licensee did not terminate the adviser’s contract for dishonesty; the licensee simply ‘warned’ the adviser not to continue the conduct.”
Jerry Come Back, Jerry show me the money
So ASIC will need to employ hundreds and hundreds of compliance and training professionals to supervise monitor and train these planners? How will that work?
So what you’re saying is that you can’t be responsible NOW for your own advice, & you can’t be trusted to follow the law
They get paid what we pay the dealerships now. Instead of paying xzy dealership $25K per annum , we just pay asic directly.
but we don’t want to be regulated by ASIC, they have proven to be incompetent.
they are fun by lawyers yet, they cannot even apply the law and they are lawyers
and they can’t even apply the law
they are useless public servants who wouldn’t know how to earn a dollar in the real world
Trouble is, asuc would have great difficulty in supervising 22000 advisers effectively. They are not doing a great job now supervising licencees. Imagine the fees to do it effectively? It might be the last straw for advisers and then clients miss out on good advice.
I think the current model needs to be examined and policed properly. Mandate external audits. Mandate breach reporting. Make rules simpler. Examined adviser technical competence not corps act or wishy washy stuff.
It is not hard to reign in cowboys. It is easy to test competence. We have an agenda that is so far undisclosed going on here imo.
Another expert blathering without knowledge or research. Yes of course individual licencing is possible, however it is not viable under the existing compensation requirements. PII for a single adviser practice is at least $50,000 per annum but it seems a Dealer Group can cover 50 advisers for about $100,000 or $2,000 each. I am eligible and could arguably get approval from ASIC but cannot afford an individual licence.
Base level PII for a single adviser practice is actually about $10K pa. It ramps up from there according to practice size and complexity. Get your own quotes for your own situation folks. It might not be as prohibitive as you think. Particularly when you offset the removal of dealer fees.
Agree PI cover does not cover anywhere near that amounts. I became self licensed a couple of years ago and have not regretted it for a moment. The cost savings achieved allowed me to employ another staff member. Large dealer groups do not want individual licensing. Large dealer groups usually set aside millions of dollars for claims…which mean the adviser pays not only for the lowest common denominator of adviser, a process to protect the business from these poor advisers, but layers of management, state managers, auditors that audit the audit staff that audit the advisers etc. There are a significant amount of support services out there. I have more training and more support than I ever received as an adviser in a dealer group. If you have a good compliance history, offer low risk advice it’s highly recommended.
This ‘charging fees to dead people’ assumes that the adviser does nothing for the payment. When we had a client who passed away suddenly, we worked with the client’s children (who were the trustees of the estate) to claim a tax refund that more than offset the death benefit tax payable on the taxable component of the fund. We still received an ongoing advice fee until the super account closed but we worked hard on behalf of our deceased client and her beneficiaries to justify those payments.
Excellent Jimmy, thank you! This is another perfect example of how these so called experts have no idea about what they are talking about. How you helped your client and her children is commendable. This is so obvious and simple yet alludes those great minds at the Royal Commission!
Everything old is new again, the whole Dealer group concept was flawed to begin with and creates unnecessary problems when a change to another more relevant group arises. needless and time consuming paperwork, emails and letters to clients (who largely don’t understand what the move means anyway) .
as for Ongoing fee arrangements, our practice has only moved from a traditional risk business to full FP since FoFA and as such all of our (ongoing) service agreements (there aren’t too many as yet) are based on a measured and detailed advice process. if we cant offer additional value to the client , we don’t charge an ongoing fee, simple.
I should like to see what model the regulator would put in place for incidental / advice or service every time a client calls the office? imagine how difficult it will be to manage billing and the like. would we say to the client, please provide your CC details before we proceed? it will be more expensive and way more time consuming to do manage. do we have a scale of fees? a phone call inward is $25.00, an offer of a review (which wee are told is part of our best interest duty) is $15.00 ? the amounts are immaterial, what is going to be a problem is the way in which we as advisers are paid for the extra work around the day to day service work, file updates and maintenance etc