Greenzone Australia partner Ray Miles

Ray Miles has challenged ASIC on its ability to monitor a fragmented financial services licensing system, and said that gaining an AFSL is “easier than getting a driver’s licence”.

The GreenZone Australia partner, on stage at the Professional Planner Best Practice Forum with ASIC senior executive leader of advice, Louise Macaulay, explained that the advice licensing system had three clear layers.

“There’s the big end of town, which are the institutional dealer groups,” Miles said. “There’s the middle end of town, which are the privately owned dealer groups, and there’s the smaller end of town – which is not that small as I understand it – that have their own AFSLs.”

Miles pulled no punches in assessing the machinations of the industry and the limitations on the regulator’s ability to manage the growing base of self-licensed advisers.

“The big end of town – I think the [Hayne] royal commission is about to clean that part out. We will have probably two big adviser groups emerge as part of that,” Miles predicted. “Own-AFSL land is largely an unsupervised part of the world at the moment, because ASIC doesn’t have the resources to police them.”

At this point, Macaulay interrupted.

“You’d be surprised what we do in that part of the industry,” she said.

ASIC chairman James Shipton announced earlier this week that the federal government would increase the regulator’s budget by $70 million and part of that would be spent embedding teams within the big five financial institutions to monitor “governance structures” in leadership groups.

ASIC’s monitoring and disciplinary powers are a subject of much debate; many question the legitimacy of the licensee system. Miles has particular doubts about whether AFSL standards are high enough.

“Getting an AFSL in Australia is easier than getting a driver’s licence,” he said.

Miles explained that getting an AFSL was just a matter of ticking the boxes, “then you get your policies, your AFSL – the whole lot – you put it in a cupboard and get on with life”.

“To get a driver’s licence, you’ve actually got to do the test yourself and prove you can drive a car,” he said.

He suggested that individual licensing might be better for advisers, an idea that was raised during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

“There’s a lot to be said for advisers being directly licensed with ASIC,” Miles said. “The risk should sit where the advice is given, not somewhere else.”

Anne Graham, managing director and senior planner at Story Wealth Management, supported this view.

“I’m absolutely in favour of being individually licensed as an adviser,” Graham said. “We’re the only profession that has this artificial layer between what we do, and our responsibilities, and the law. Accountants don’t have to be licensed through a licensee, lawyers don’t, medical professionals don’t, engineers don’t, but we do. Wouldn’t it be lovely if we’d just be responsible for the advice that we give personally?”

Macaulay refrained from entering the debate about individual licensing, instead emphasising the importance the regulator was placing on regtech for helping the industry – ASIC included – deal with regulatory challenges.

“Were quite keen as a consumer and as a regulator to get some products out there that will help you in the industry deal with these issues around compliance,” Macaulay said. “We’re piloting a number of natural language processing trials in a regtech sense, to see if we can cut through some of the more repetitive and time-consuming tasks that we do in our business of regulation.”

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