Inefficiency and red tape are holding planners back from providing optimal outcomes for their clients. The biggest barriers to efficacy are bloated approved product lists (APLs) and a convoluted regulatory framework.
Those were key discussion points for a panel brought together at Professional Planner’s Research Forum to discuss the future role of dealer groups and the licensee model. The panel was quick to identify an overly complex environment with too many stakeholders and multiple competing interests. Annick Donat, chief executive of Madison Financial Group, made it clear that not enough emphasis was being placed on the adviser.
“You’ve got PI [professional indemnity] insurers that are in our community and are looking out for us, but they don’t want to take on undue risk,” she said. “You also have a licensee needing to control the APL because they can’t research the thousands of funds that are available. Then you’ve got the advisers, who have a framework around which they have to operate. The ecosystem is far more complex than it needs to be, and we need to understand that the person actually providing the advice is the person whose neck is in the noose.”
Asked about the direction dealer groups should take to add value for advisers, Donat said a more thorough education framework and a deepening sense of community were becoming more important than licensing itself.
“Dealer groups are important, because we’re dealing with humans and humans are tribal,” Donat said. “We like to be part of a group. But the greatest gift licensees can get is actually not having to license advisers. It’s a burden that carries risk.”
The idea that the focus of licensees needs to shift away from licensing, which is fraught with regulatory risk, was a theme for the panel. A more appropriate model for the licensing function, Donat suggested, could be the formation of a singular body that keeps everyone to the same standard. “That way, everyone’s obligated to operate within the same standard and take the same approach,” she said. “At the moment, we have legislation, regulation, and then policy…the interpretations are making life too difficult.”
Donat reiterated that the regulatory burden being placed on advisers was extraordinary, and the effort spent on compliance was precluding them from focusing on clients. “Our industry is burdened with [doing] everything other than what it’s good at – which is helping people make great, informed decisions.”
Fellow panellist Chris Lioutas, chief investment officer at PSK Financial Services, echoed this sentiment, and identified an increase in cost-to-serve as the outcome of a complex regulatory environment.
“Advisers can’t grow their businesses – they’re becoming stifled,” Lioutas said. “They’re struggling to service low-balance clients because the cost is too extreme, and they can’t take on new clients because they don’t have the capacity.”
Lioutas also called overweight APLs a hindrance to product delivery from both the licensee and adviser end.
“Most APLs are bloated, to be honest,” he said. “There’s too much product there, and managing it is an onerous process. The first point of call with APLs should be to cull, so you free up your time to focus on other things, whether that be LITs, LICs, ETFs, ETMFs or hybrids.”
Donat was asked whether the challenges of the advice ecosystem might force smaller firms to align with the institutional side. She replied that technology and collaboration would ignite practice efficiency and lead to better client outcomes.
“The value for the client is not in the advice process, it’s in the advice itself,” she said. “A lot of what the industry needs can be facilitated through technology. We need a consistent advice process, and if we fundamentally believe that great advice changes lives – and I do – we need to collaborate as a community and do better research, find better products, put together better forums and have better conversations.”