The regulator’s proposal to make the responsible manager (RM) within a licensee meet the same qualifications as advisers would create “two classes” within the licensee environment, says William Mills, who runs the self-licensed Price Financial Intelligence.
“The responsible managers should be advanced advisers anyway, so it makes sense,” Mills says. “And what you’ll end up with is two classes of responsible managers. [One will be] the compliance manager, who is not an adviser, and the responsible manager, who has the advice qualifications.”
Mills says the proposal “didn’t come out of nowhere”; members of the Association of Independently Owned Financial Planners (AIOFP) have been discussing the possibility for some time, he said.
Grahame Evans, managing director of licensee GPS Wealth, also says the new bill, if passed, would create a different class of responsible managers within licensees.
“Currently, RMs can specialise, whereas [under the Financial Adviser Standards and Ethics Authority] you’re more likely to have more than one RM – one who has the qualifications and others who report to that person,” Evans says.
Consultation paper 305, put forward by ASIC today, proposes an amendment to RG 105, which is the regulator’s policy for evaluating the skills and knowledge of licensees.
In short, under current rules, a licensee must demonstrate that the RM meets one of five qualifications to prove their appropriateness for the role. The amendment adds a new, sixth option, which equates to the same qualifications that advisers will require in the as-yet unreleased mandate from FASEA. It also would require that “advice licensees have at least one responsible manager who satisfies Option 6”.
It is understood the FASEA board of directors is meeting this weekend to finalise legislative instruments for the new education standards, which are expected to be released formally next week.
In an overview of the proposals, ASIC says the purpose of the update is to “reflect the higher standards of professionalism expected in the industry”.
“To satisfy the knowledge component of Option 6, we consider that [an RM] should have to pass the financial adviser exam, satisfy the degree requirement and comply with [continuing professional development] requirements,” the document reads.
Australian financial services licensees must have at least one responsible manager, though the regulator prefers at least two.
“The number of people an AFS licence applicant should nominate as responsible managers will depend on the nature, scale and complexity of their proposed business,” the update states. “However, we generally expect applicants to nominate two or more [RMs].”
Evans broadly agrees with the proposal, saying it’s “pretty commonsense”.
“How can an RM have less competency than the people they are supposed to be managing?” Evans continued.
Price Financial Intelligence’s Mills also agrees with the proposal in principle – “It’s logical when you think about it,” he says – but believes the education requirements for RMs should be more tailored to their specific role in the advice ecosystem.
“There aren’t university models for licensing,” he says, “but you should at least be putting more of the education requirements for them around ethics and integrity.”
ASIC is seeking input from stakeholders for the consultation paper, with comments closing on December 6.