Earlier this year, the Australian Securities and Investments Commission (ASIC) intensified its focus on self-licensed advisers, aiming to enhance scrutiny and address potential non-compliance within the sector. This renewed emphasis was confirmed by the CEO of the Financial Services Council (FSC), who pointed out that ASIC’s focus aligns with the appointment of new commissioner Alan Kirkland, signalling a significant shift in regulatory strategy.
At that time, FSC CEO Blake Briggs cautioned that self-licensed advisers might face increased scrutiny under Kirkland’s leadership, as the regulator seeks to tackle compliance issues that have previously been overlooked due to resource constraints.
Speaking on the ifa podcast this month, Lifespan Financial Planning CEO Eugene Ardino applauded ASIC’s proactive scrutiny of self-licensed advisers, noting that while it adds complexity for single practitioners, those doing the right thing have little to fear.
“ASIC’s looking to weed out of the very bad advisers, the very few that there are, in my opinion. So if you’re doing the right thing, I don’t think you’ve got really anything to worry about, which I believe is most advisers,” Ardino said.
However, Ardino acknowledged that being a single practitioner and managing one’s own license poses additional challenges.
“Being a single practitioner and then adding a layer on top of that of running your own licence, I think that is probably an extra challenge because it’s just another layer. If you’re within a licensee community then I suppose you don’t have to think as much about that licensing structure”.
He emphasised that smaller advice practices, especially single practitioners, are not being deliberately targeted by regulators. But, he admits, they may have been “a bit neglected”.
“I don’t think the government’s gone out and say, ‘Well, how can we, how can we weed out single practitioner?’ And if you look at what’s actually been happening, a lot of the legislative changes over the last five years actually gotten rid of, hasn’t gotten rid of big advice firms, but it’s pushed a lot of the large institutional licensees out because they’re finding it too hard,” he said.
“But it has actually also caused a lot of smaller advice businesses to merge or to join forces in some way with some of their peers and set up licensing and stuff. So there’s been an enormous amount of change in structure throughout. So now I wouldn’t say that being targeted, but I certainly would say that a lot of these reforms and a lot of these fixed costs are a lot harder on single adviser practises, in which case they’ve probably been neglected a little bit.”
Ardino asserted that single-adviser practitioners are crucial to the profession’s ecosystem.
“I don’t think we should have a framework that prohibits or makes it overly onerous for those practitioners to function because I think they’re an important part of any professional community,” he said.
To hear more from Eugene Ardino, click here.
Eugene, next time, please smile.
Just imagine, for a moment, if all accountants (not, tax-agents) were forced into a “dealer-group” situation. Oh, add lawyers to that, too.
Yes, I note the requirement to be professionally qualified (i.e., have a degree). Maybe, in a few years’ time, all advisers may be afforded the same privilege of being worthy of trust.
Introducing a single individual licensing model, regulated by a single professional body for qualified financial advisers, without requiring them to be licensed through a third-party Australian Financial Services License (AFSL), including self-licensed AFSLs, would address many challenges in the advisory sector. This model could not only reduce the cost of advice but also resolve issues like those faced by women returning from maternity leave, who often struggle to find part-time opportunities. Many AFSLs argue that registering an Authorised Representative (AR) is expensive, and as a result, ARs returning from maternity leave or parents with young children are often pressured to return to full-time work shortly after their leave.
Exactly!
All the talk about lowering the cost of advice, yet the AFSL regime for (actual) qualified and professional advisers is never addressed. You only need to look at the profits the big AFSL’s, listed on the ASX, make which are also burdened with the need to hire many extra staff, compliance people, overheards. This is all money taken from Advisers and their clients at the end of the day. Most advisers are easily paying $50k plus per year in licensing costs, which pales in comparison to the begrudged CSLR costs that advisers have to fund.
Leave the AFSL regime for the super funds running their own advice teams, so there is more oversight. Professional and qualified advisers should operate under a professional body with much less licensing costs. If the government were real in their intentions they would address this point, and that would significantly reduce the cost to provide advice!
$50K plus per adviser in licensing costs? Seems high for self licensed advisers.
Probably about right for ARs licensed through a third party licensee, but most of that is not regulatory licensing cost, it’s licensee overhead.
My company has been paying $130k/yr and only giving general advice. It was $10k when we opened a decade ago but ASIC was moved to the industry funded model. That increase caused job losses.
Eugene is speaking to his book.
Pretty simple.
Fake news. Just a dealer group head trying to scare off advisers from going self-licensed. These big groups are bleeding advisers and they know if the exodus continues, they have no future in this industry. We found the extra time spent on running the license was small compared to the time savings and efficiencies unlocked by ridding ourselves of the dealer group imposed additional red-tape and moronic compliance personnel.
Here is the bottom line – Dealer groups are run in such a way, to protect themselves at all costs. They are not our friends. Our interests are not aligned. They do not care about client satisfaction, customer service or the success of their financial advisers. All they want is their fee, and the lowest possible risk of a dispute from the lowest common denominator. If you make a mistake, good luck claiming on their PI policy. That will only go through if the dealer group chooses to lodge a claim, and they don’t want claims or else if affects their ability to recruit more advisers. A self-licensed financial adviser owns their own policy.
The small handful of dealer groups left are undermining self-licensed financial advisers because they have run the numbers themselves. They know that any financial adviser with half a brain would be better off without them. We found the initial costs were recouped in a couple of years via lower ongoing costs. While there was some initial disruption, it was small in the grand scheme of things. I blocked out 4 weeks in my calendar and I worked across 4 weekends. A small sacrifice which has been repaid with time savings many times over since then. My greatest fear was client pushback, but that was all in my head. Not one client raised a concern. All I received was emails full of positivity and congratulations. In fact a referring accountant told me they were now more likely to refer as a result of the change, which surprised me, and they have followed through.
Any IFA’s reading this – find yourself a good compliance consultant who can manage the upfront and ongoing process, and just do it. Rid yourself of these dealer group leeches!
You are spot on about PI insurance. I know an adviser who ticked the wrong box on a form. The client was out of pocket $50k. The adviser was a good person. Owned up and contacted the licensee to report the error and make a claim. Adviser thought they would be up for the $10k excess. However the large licensee refused to lodge a claim. Said it would increase the premiums for the rest of the advisers. This young adviser was devostated. Ended up selling the business and has left the industry. A sad tale. The licensee is now wondering why their best advisers are fleeing to go self-licenced.
any recommendations for a good compliance consultant?
When I had a risk-only one-adviser pracrice for 5 years, it was abvious to me that ASIC did not want small AFSLs. Their ideal was under 150, so they could always threatnen to close down a lot of advisers to make a point. Like with Westpac in 1999
Single practitioners managing their own AFSL does involve more complexity than single practitioners being directly licensed through a professional standards board as happens in most other professions. But that is a hypothetical example, because our system doesn’t allow it.
Single practitioners managing their own AFSL does NOT involve more complexity than being an authorised representative under someone else’s licence. AR’s not only have to do deal with regulatory requirements, they also have to deal with extra unnecessary compliance layers imposed by the licensee, and they have to navigate the heightened regulatory risk associated with recommending the licensee’s product.
Again, ASIC is looking for soft targets. Again, ASIC ‘misses the boat’, because the majority of frauds occur, where the adviser is handling clients’ funds. Which is more important regarding harm to investors, compliance scrutiny of small AFSLs or handling client funds for potential frauds without ASIC supervision (eg, DIXON Financial all eggs in 1 basket)? Which advisers are paying the $40 million IFM and $20 million in CSLR levies? Those advisers who do not handle client’s funds, to which Politicians are totally oblivious. We, who never do not handle client’s funds, paid $45,000 in levies (Shenton Australia), $23,000 in levies (Shenton Hong Kong) and $26,000 in Professional Indemnity insurance, to cover those who handle client’s funds. Who’s playing the blame game like the grim reaper without any supervisory coordination, with those working with clients ‘at the coal face’?
Agree with you.
All seems like they want to get back to the good old days of AFSL holders being the big banks and AMP.
Seems ASIC just finds another way to target Licensed Financial Planners? Does ASIC look at the Industry Super Advice as closely?
Hi Maja,
I’ve just read your article, and it got me thinking about how important creating a proper business system is for smaller practices, especially given the extra pressure single advisers are facing now. For small practices, a good system can really be the difference between keeping up with the demands of running a business or feeling overwhelmed. By streamlining processes and cutting out inefficiencies, it allows a sole practitioner to manage more clients without needing extra staff. It also helps ensure things get done consistently and properly, rather than relying on memory or individuals. Even under ASIC’s increased scrutiny, having a strong system in place can really make things run smoother and keep compliance in check.
Your piece definitely highlights the added challenges for smaller firms, and I reckon business systems could be a big part of the answer.
Mark Lewin
Back Office Hero