Ripples become tsunamis

Ripples become tsunamis

In the last few weeks, the number of financial advisers seeking an exit from the industry or a new licensing home has increased dramatically as the full force of the royal commission is felt.

I watched the spectacle of the Royal Commission into the Misconduct in the Banking Superannuation and Financial Services Industry via live streaming and the ifa live blog.

It felt like I was watching an episode of Game of Thrones with shocking revelations and blood everywhere.

It is only post the shock that we have had the time to digest and think about the ramifications of what we have just witnessed. 

I had originally thought the RC was unnecessary given the continual reviews being conducted and especially post the introduction of Future of Financial Advice (FOFA) and the Banking Executive Accountability Reform (BEAR). I believed that it was just the government having to bend to the political winds.

I was wrong.


The revelations were staggering and we will continue to see the ripples become tsunamis of change in the coming weeks, months and years.

One of which, of course, is licensing movement among financial advisers.

In the last two weeks, I have seen had substantial increase in the number of inquiries from planning practices and breakaway groups seeking assistance to find a new dealer/licensee or to achieve self-licensing.

Over the last 12 months, we have seen a clear preference to move to smaller dealer groups with less than 50 advisers that have a strong collegiate culture and where a single voice can be heard.

In addition to helping these individual practices move, a number of practices have come together to form break away groups.

The common theme in all cases is a desire to control the future of their businesses albeit with a fear factor regarding the obligations of compliance and the perceived costs of a non-subsidised environment.

When considering self-licensing, the average timeline is now six to nine months for an ASIC licence from submission of an application to approval. The cost of a “consultant assisted” application is on average $10,000 to $15,000 depending on the complexity of the business. PI insurance and ongoing compliance are two of the larger ongoing costs at approximately 2 per cent of gross revenue and between $10,000 and $60,000 (for an external consultant), respectively. Technology can also account for a considerable share of ongoing expenses, depending again on the needs of the business.

Many of the other services a business would typically need can generally be outsourced or conducted in-house. Forte has sourced best-of-breed external providers and has a working knowledge of those dealers/licensees also providing dealer-to-dealer/boutique services.

For those businesses seeking to migrate to an alternate dealer/licensee, Forte has and continues to conduct due diligence on most dealer groups' offerings (ASIC actions, financial stability, culture identification, service offers, cost etc.) to identify the most appropriate and best aligned dealer/licensee in each circumstance.

We have received in the last two weeks the equivalent of the previous three months of inquiries in regard to sale of practices and exit of industry.

The current excessive demand to supply is slowly shifting as many bring forward their exit dates, which for many was the period up to and including 2024 with the mandatory education requirements.

The last two weeks points to future legislative change and business re-engineering, and for many they are taking a personal inventory and realising they do not have the energy for the change that is about to come.

Supply is growing but it is still not even to close to meeting demand, and there have been no changes in prices or terms being achieved. I do expect contractual changes to the way grandfathered revenue is treated.

It has been an astonishing couple of weeks that will change our industry forever.

To date there has been little legislative change to the benefit of the consumer. It is my hope that future change will start and finish with the public interest front and centre.

As Winston Churchill said: “There is nothing wrong with change, if it is in the right direction.”

Steve Prendeville is managing director of Forte Asset Solutions and Forte Dealer Solutions 

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