Advice businesses with one foot out the door of their institutionally owned licensee might have second thoughts about moving, following the spectacular collapse of Dover Financial Advisers.
“This so-called once-in-a-generation shift of planners leaving the large licensees may not happen…People may not want to move; licensees will be questioning themselves, they’ll be questioning advisers, there will be a lot of due diligence on both sides,” Morgan Stanley equity analyst Daniel Toohey says.
Toohey’s view stems from Morgan Stanley research on listed wealth management businesses, including AMP. He said he believed a more intensive focus on the so-called second tier of licensees – those outside of the big four banks and AMP – could bring about questions and uncertainties around compliance and adequacy.
“The net result of closer scrutiny of the second tier will be a reluctance from advisers and licensees to move between groups and take on new authorised reps,” Toohey said.
Advisers in transition
The collapse of Dover has come at a time when many advice businesses have found themselves considering a future outside of institutionally owned or aligned advice networks, either because they’ve been forced to, due to banks selling off their wealth-management arms, or as a result of organic movement.
National Australia Bank, for example, has announced it plans to spin off its aligned wealth management business, which includes Godfrey Pembroke, Apogee Financial Planning, Meritum Financial Group and GWM (Garvan) Adviser Service. ANZ, meanwhile, has sold its aligned advice business to listed wealth management aggregator IOOF.
Over the last two years, there has been a significant drift of adviser businesses leaving institutionally owned groups and joining lesser-known licensees and the ranks of self-licensed advisers, research commissioned for Professional Planner shows.
Dover’s collapse, foreshadowed in an email sent on Friday afternoon before the long weekend by Dover owner Terry McMaster, could lead to advisers being more reluctant to join such smaller licensees, where oversight and supervision might be less of a priority, Morgan Stanley’s Toohey reckons.
Melbourne-based practice Scholten Collins McKissock (SCM) is one advice business that has opted for self-licensing since leaving NAB-owned Godfrey Pembroke at the end of last year.
Practice owners looking to move towards self-licensing or into non-institutionally aligned dealer groups should ensure that licensees cover off certain aspects relating to the advice process, SCM executive director and practice principal, Matthew Scholten, tells Professional Planner.
“Oversight and supervision, the charging mechanisms and how advisers are remunerated – those things have got to be spot on,” Scholten says. “That’s critical.”
Extreme vetting
An ASIC spokesperson confirmed the securities regulator had been investigating Dover for more than a year before McMaster moved to take matters into his own hands by emailing all of the group’s representatives.
It is understood the regulator made it clear to McMaster that Dover would have its licence revoked within a matter of months.
In the letter to Dover’s advisers on Friday, McMaster warned that providing any new advice would be in “direct contradiction of ASIC’s requirements”.
Dover was called out during the Royal Commission into Misconduct in the Banking Superannuation and Financial Services Industry for its client protection policies and process during client disputes as well as it’s adviser vetting protocols. Dover grew quickly in the last year and a half to become the 10th largest dealer group in the country at the end of May.
On Tuesday afternoon, ASIC posted a checklist for licensees that may be in discussions with former Dover advisers looking for a new home. The list emphasised extreme vetting of ex-Dover advisers.
ASIC’s advice to licensees is to, at a bare minimum, receive audit reports and reference checks from any previous licensee; however, in the case of ex-Dover advisers, ASIC suggested audit reports and references from the licensee, along with getting additional assessments of the person’s competence, including vetting all advice from ex-Dover advisers for a period of time.
