Almost half (48 per cent) of planning firms are either self-licensed or planning to become self-licensed, illustrating the trend away from institutional dealer groups and towards independent advice, a recent Professional Planner poll has found.
Professional Planner published a full listing of licensees in the Australian market in May 2017, which showed that of the 21,489 advisers registered at the time, 9403 (44 per cent) were licensed by one of the big four banks, AMP or IOOF, while the remaining 56 per cent were operating under either an independent licence or a dealer group not considered one of the ‘big six’.
The poll, held over parts of February and March this year, asked, “Are you self-licensed, or considering becoming self-licensed?” It follows recent figures provided by Adviser Ratings showing that all of the big six licensees, apart from IOOF, have lost significant adviser numbers in the 12 months to February 2018.
Jim Stackpool, managing director of Certainty Advice Group, says the trend is part of an inevitable shift away from advice influenced by product alignment.
“The vast majority of today’s dealer groups were built in a different era of financial advice,” Stackpool explains. Since then, Future of Financial Advice reforms and other developments have put pressure on larger, product-aligned dealer groups to justify their models, he says. The current Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry will increase this scrutiny, and lead to the big dealer groups being “regulated out”.
“The increasing compliance requirements on these well-established dealer groups means they must cater for their highest-risk distributors. This is turning them into paper-fillers to satisfy compliance, rather than sitting in front of clients,” Stackpool says. “I believe it to be inevitable that big dealer groups are currently undergoing their most significant strategic re-assessment.”
David Williams, founder of My Longevity, says, “The trend towards self-licensing is healthy.”
Williams says the Australian Securities and Investments Commission was previously concerned about “policing individuals”, and thought the bank-owned networks would help with “the ethical oversight of networks”.
“Well, we all know that has never proved OK,” he says.
*Professional Planner will release an updated version of the full Australian licensee listing in May this year.