Few financial planners would deny they are in the midst of significant disruption across numerous fronts, including regulation and compliance, educational and professional standards, and technology.

Developments in these areas are accompanied by heightened oversight from the federal government and the corporate regulator, the Australian Securities and Investments Commission (ASIC). This affects the whole sector, including Australian financial services (AFS) licensees of all sizes – whether institutionally owned, non-aligned, or independent – and all financial planners.

A number of bank-owned dealer groups have faced reputational damage as a result of incidences of adviser misconduct and systemic problems
being publicised in the mainstream media.

Self-licensed planning practices have not been immune from similar issues. They also face considerable challenges just in meeting their Future of Financial Advice (FoFA) compliance obligations.

“It’s difficult for a small licensee to keep on top of the legal obligations, to run a business and to be an adviser, let alone throwing things like parenting and being a human being into the mix,” says Dacian Moses, president of The Boutique Financial Planning Principals’ Group (BFP) and principal of northern New South Wales planning firm Waterfall Way.

While industry and professional bodies such as the Association of Financial Advisers (AFA) and the Financial Planning Association (FPA) represent the broader mix of planners and practices, The BFP is a mouthpiece and support network for boutique firms.

The BFP is aimed squarely at planning practices with up to five authorised representatives, and where the principal also works in the business.
It currently has more than 85 member firms, which each employ between one and five planners.

All members are required to hold their own AFS licence, or be working towards attaining this within a two-year period. They must also be members of the FPA, though Moses emphasises that the FPA doesn’t officially endorse BFP membership.

Moses recently started his second year as BFP president, having been elected to the role in September 2014. He has been actively involved on its executive committee since early 2008, not long after he obtained his own AFS licence in November 2007.

Why he does it

Heading up the BFP – as opposed to the larger industry bodies – is purely a voluntary exercise, with the president and the entire executive committee giving their time free of charge while continuing to run their respective planning businesses.

“I believe that the best chance consumers have of getting quality advice is when the relationship between the licensee and the adviser is really close,” Moses says. “What The BFP represented, for me, was a small number of quality people who’ve been doing this for a while, who had a lot of intellectual property about what it means to be a licensee, and they were willing to share. That was what brought me in.

“I certainly couldn’t see the likes of larger licensees sharing their solutions to compliance and to advice problems in the way that we do. Part of what makes The BFP, if not unique, but special amongst associations, is that openness. We’re not actually competitors.”

Moses’s participation is also underpinned by a strong commitment to, and belief in, small financial planning businesses and their importance to Australians.

“The profession of financial planning and consumers in this country need small business,” he says.

“[The BFP] is not any kind of homogeneous group; we’re never going to control the majority of client investment decisions in this country. But for a healthy profession and for a financially secure population, they need to be able to choose between a large institution and a small adviser-owned business that matches their philosophy.

“We’re basically 85-odd niche businesses, and while there might be some small crossover, there’s certainly room for the individual approach that each business has got, so that we’re not competing directly for the same [type of client],” Moses says.

Topics such as the importance of independence to planners and their clients, and the ongoing viability of commission-based remuneration models, often attract a wide range of views among BFP members.

But Moses sees this diversity of views as one of the group’s strengths, as “there is a wide range of business models within the boutique group”.

“What we’ve got is a group of sometimes wildly different philosophies – with one not necessarily more correct than the other, but it will appeal to a certain subset of the population – and I think that’s what it’s about. Consumers need to have informed choice,” he says.

The rise of the independents

“Instances of poor advice are not limited to vertically integrated models; it’s just that currently there’s been a whole lot of it happening over there. The instances of poor advice and conflicted advice that are currently working their way through the institutional ranks, yes, that is good for [The BFP],” Moses says, though he concedes the reputational damage can affect all planners.

He doesn’t suggest small licensees are immune to cases of misconduct or poor advice, “but I feel pretty confident saying that, within The BFP, we’ve got fairly clean operations. This was part of our reason for aligning with the FPA”.

“If you can’t hold down an FPA membership, we probably don’t want you. That was a deliberate and conscious decision, and I believe we’re reaping the benefits,” Moses says.

Regulatory priorities

“ASIC has said that it is going to spend more of its scarce resources looking over there [at institutions] – though the lens of ASIC’s focus will no doubt shift back towards us [non-aligned AFS licensees].”

Moses sees the regulator’s intense scrutiny of institutionally-owned planning businesses and dealer groups as the most effective way to minimise harm using ASIC’s limited resources.

“If you take out a small adviser’s business, maybe you’ll affect a few hundred clients,” he says. “What ASIC really want to do is spend its time where the most harm is occurring; and for it, the most harm is when you’ve got thousands of clients who are badly affected, [involving] millions or billions of dollars. So it seems reasonable.”

Planners fight for the right

On a broad level, the financial planning sector has for some time been fighting for the right to self-regulate instead of submitting to government-mandated controls policed by ASIC. At present, Moses does not believe financial planners are winning this battle. “But disruption is happening as we speak,” he says. “It’s a live issue, with the government response to the FSI [Financial System Inquiry] and the PJC [Parliamentary
Joint Committee] still in play.”

Government responses to these inquiries have been delayed further by the recent change of Prime Minister and the subsequent cabinet reshuffle.

A review into a proposed industry funding model for ASIC, which closed to new submissions in early October, is also part of the FSI.

“We’re participating right now in the consultation paper on ASIC’s new funding model, and I actually see that as an opportunity,” Moses says.

“If ASIC has a way of requiring less money to regulate the industry because there’s some sort of co-regulation, that seems to be a good thing.

“As far as I can tell, at the moment, what we’ve got is a very regressive ASIC tax on the small business sector.

“We think there are some issues of fairness there. Certainly, I think the large institutions would object to paying between 1 and 5 per cent of gross revenue to ASIC, on top of everything else that’s going on at the moment.”

Glenn Freeman is a senior journalist for Professional Planner. He has around three years’ experience in financial services journalism, having also covered broader areas of business including M&A activity and energy. His journalistic experience includes five years spent abroad, where he was editor of an oil and gas title in the United Arab Emirates along with other in-house and freelance projects, which included stints in motorcycle and automotive journalism.
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