The cost of implementing new systems to document advice to the extent that’s expected in the prevailing regulatory environment has played a big part in determining BT Financial Group’s footprint in wealth management, BT chief executive Brad Cooper has revealed.
It is understood BT is close to announcing its plan for owning advice following months of exploring options relating to its Westpac Financial Planning business.
While Cooper did not comment specifically on those plans, he pointed to the immense cost and complexity of documenting advice, which he described as the biggest challenge for organisations that want to own and operate advice businesses in the future.
“Organisations that are interested in participating in the advice industry, under whatever guise, are going to have to recognise that recordkeeping, retention of information – these will be a big part of the investments you’re going to make going forward,” Cooper said, at the Self-Managed Superannuation Fund Association National Conference in Melbourne on Thursday, during a discussion on the topic “Challenges and opportunities facing SMSFs today”.
“It’s not just SoAs, it’s records of phone conversations and a whole range of things,” Cooper commented. “Because if you do get a review, it will be ‘on what basis did you consider this vehicle or this investment strategy’ and ‘how can you demonstrate you acted with the best-interest obligation.’
“Unfortunately that’s the way it is now.”
Cooper’s comments on the impost of advice documentation were made in light of ASIC’s findings that 90 per cent of financial advice relating to setting up an SMSF did not comply with the law, revealed in ASIC report 575: SMSFs: Improving the quality of advice and member experiences.
While Westpac has been the holdout from fleeing wealth among the big four – ANZ Banking Group, Commonwealth Bank and National Australia Bank have all announced plans or already spun off or sold the majority of their advice businesses – an announcement regarding BT and its future ambitions relating to advice ownership is expected in coming months.
Around the middle of last year, BT’s salaried financial advice network comprised close to 490 financial advisers, which included BT Financial Advice and Westpac Financial Planning salaried advisers, according to Professional Planner’s 2018 Licensee Survey.
The group’s salaried network sits beside its aligned dealer groups, which include Securitor (303 advisers) and Magnitude Group (177 advisers), according to the Licensee Survey, which was up to date at the end of March last year.
Signs of a shakeup within the group relating to its advice ownership aspirations were apparent when it pulled the pin on its entry-level advice business towards the end of last year.
Since the second round of hearings at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in April last year, which shone a spotlight on the shortcomings of the advice industry, bank executives have been trying to figure out how advice fits within their respective strategies.
“The big issue for us is that the burden of proof falls on the adviser and the importance now of documentation and recordkeeping is clear,” said Cooper, who was joined on stage by Mercer’s David Knox and the SMSF Association’s Jordan George. “Advisers might be well-intentioned people, but if [advice] is not recorded and evidence based, then it doesn’t matter. Scrutiny is going to increase now.
“The investments that people [who want to operate advice businesses] are going to have to make will be around digitisation, indexing and workflow management,” he noted.
Mercer’s Knox said the documentation of advice was heading towards what’s expected in medical or counselling services.
“Every time a doctor or counsellor sees a patient, it all has to be there,” he said. “Talking about matters around finances is not quite life and death, but [the advice industry] is certainly moving in that same direction.”
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