‘Trojan horse’ threat escalates for licensees

Small and medium-sized licensees are currently benefiting from a migration of advisers and funds under management away from the institutions, but they also face heightened risks.

That is the view of Steve Prendeville of Forte Asset Solutions and Forte Dealer Solutions, who has identified talent and FUM recruitment risks as a key concern in his 14th annual Market Commentary.

Published exclusively by ifa, Mr Prendeville’s commentary outlines specific risks that mid-tier and boutique licensees need to consider as they build their adviser ranks.

“Small and medium-sized dealer groups all reported the most significant onboarding of new advisers in 2016 and expect this to be even greater in 2017,” Mr Prendeville wrote.


“The challenge is having the available resources to introduce new advisers whilst still delivering the expected historical services to existing practices.

“Practice recruitment is both a time and resources consuming activity for migrating practices and dealer groups alike. Dealers are hyper sensitive to compliance standards as none want to introduce a Trojan horse into their midst, given the costs and damage created by any enforceable understanding or ASIC finding.”

Mr Pendeville said the ability is fend off this "Trojan horse" threat is hampered by the banks’ hoarding of legal and compliance dealer group expertise.

“In-house or outsourced compliance services are also limited as the banks absorb all available compliance professionals available,” he wrote.

“One bank anecdotally has 400 compliance personnel working within its distribution channels. There has consequently been a cost increase for compliance talent in response to the current supply and demand imbalance.”

Mr Prendeville tipped increased merger and acquisition activity between non-bank dealer groups, off the back of diminishing margins and increasing compliance.

To access the full market commentary click here

‘Trojan horse’ threat escalates for licensees
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