Prominent licensee heads have stood up for the licensee/authorised representative model and have asked potentially displaced advisers to consider carefully whether they’re cut out for operating their own Australian financial services licence.

“The governance framework is onerous… There’s a lot of obligation on not only the adviser but also on the licensee and the responsible manager and it’s not something that should be considered lightly,” said Annick Donat, Madison Financial Group chief executive.

Donat was speaking as part of a panel, which included Leanne Milton, AMP’s head of research, Ian Knox, co-founder and chairman of Paragem, and Lachlan Cameron, PM Capital’s head of distribution at the Professional Planner Researcher Forum in Sydney.

Further, Donat commented that many advisers who may be seriously considering taking on the responsibility of their own licence may have been put in the position because of issues out of their control.

“Many advisers might be feeling they’ve lost trust and faith in the people who are supposed to support them. Many of these advisers I think may not want to go self-licensed but feel like they’ve been given little choice,” Donat said.

The continued fallout within the advice industry in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry’s interim report and in advance of the final report due in February has led to banks selling off their wealth management businesses and advisers moving away from institutionally owned models.

Paragem’s Knox, who also is a director of funds researcher, Lonsec, questioned whether advisers who are moving away from institutionally owned businesses to start their own licence are making the right move at the right time.

“The heat is on and they don’t like the heat, which is valid because there is a lot of heat. But you can’t pretend you can start your own licence and get a consultant who’s going to give you everything you need to be compliant; that beggars belief,” Knox commented.

Knox expressed some scepticism at the notion that moving to a self-licensing model for advisers might represent a genuine expression of independence.

“A lot of these advisers [considering self-licensing] might be practices that were bought perhaps by an institution or have been growing their businesses under some kind of buyer of last resort arrangement. I don’t think they’re suddenly born again and independent.

“What we might have is an extreme situation where people in many cases with very low skills in corporate governance, in risk management, in the understanding of Corporations Law, and they’re going out and get a licence… in an industry where a lot of the talent pool has been sucked up into the banks because of the remediation processes,” Knox said.

“I think it’s a very bad time commercially to do it.”

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