The self-licensing movement has led to a proliferation of dealer-to-dealer services, with insurance group ClearView the latest to set up an offering.
ClearView will launch its licensing solutions business, called LaVista, today. The company joins other licensee services providers that support advice practices looking to take on their own Australian financial services licence, including BT’s Open, NAB Connect, Affinia, IOOF’s ‘Alliances’ and more established players such as Centrepoint Alliance and AMP’s Jigsaw.
More than 600 new AFSLs were issued in the four years to the end of 2017, including 235 last year, CoreData figures show.
Trend marches on
The march of advice businesses towards self-licensing will probably swell. The fallout from institutions divesting from wealth management seems likely to continue and advice practices are looking to distance themselves from the Hayne royal commission’s lambasting of the country’s largest financial institutions.
Institutional dealer groups have always had cohorts of dissatisfied advisers who have wanted greater control and autonomy and have left to set up their own licence but this trend has accelerated in recent years, said Todd Kardash, ClearView’s group licensee general manager.
The trend has coincided with a number of major inquiries and reports, including the Parliamentary Joint Committee report on the life insurance industry, APRA’s Prudential Inquiry into the Commonwealth Bank of Australia and the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Kardash pointed out.
This movement is also reflected in the results of a recent Professional Planner Online Poll, which found that the majority of the more than 450 advisers who responded planned either to sell their practices, join a new licensee or start their own ASFL in the next 18 months.
With so many business models in the advice industry in flux, institutions are looking to hedge their bets on how advisers will operate their businesses in the future.
“The move to self-licensing from some of the bigger firms is an absolute trend and we’re seeing that all around us,” BT’s Phil Butterworth said during an interview with Professional Planner at the time of the BT Open launch. The idea behind BT Open is to help self-licensed advice practices set up by leveraging the services and infrastructure of BT’s Panorama platform.
Commonwealth Bank’s Colonial First State – the wealth business left behind following the sale of the bank’s asset management business to Japan’s Mitsubishi UFJ Trust and Banking Corporation – is understood to be working on its own dealer-to-dealer services business, attached to its FirstWrap platform.
Small to medium-sized advice firms increasingly want the autonomy and flexibility that comes with being self-licensed but without the cost and distraction of running a complete back office, ClearView’s Kardash says.
The move towards self-licensing comes as the securities regulator has added to the responsibilities for licensees, requiring the responsible manager to be compliant with the new Financial Adviser Standards and Ethics Authority (FASEA) guidelines for advisers.
Amid greater product and advice separation, rising consumer expectations and elevated standards for higher education and professionalism, many advisers have outgrown the traditional dealer group model, Kardash comments.
“Being self-licensed gives advisers greater control over their future because they’re not confined to a limited APL or held back by rigid, one-size-fits-all compliance rules.
“In a dealer group, processes are often set to cater for the lowest common denominator. This protects the licensee and other practices in the group but it can also be frustrating for some practices.
“We think this will only increase and the royal commission will be the catalyst that leads to more advisers finally making the leap,” Kardash says.