Hugh Robertson from Centaur Financial Services

A Professional Planner online poll has revealed advisers are placing more value on regulatory oversight over licensee services like scaled pricing, operational support, insurance management and approved product lists.

Seventy-four per cent of the more 350 respondents to the survey – which asked “what is the most valuable service a licensee provides?” – indicated regulatory oversight is their main concern, with the remaining votes shared between the other options.

The result reflects current themes in the advice industry, including increased compliance and an advice ecosystem that is giving proprietors access to offerings previously only available at the licensee level.

According to Hugh Robertson, managing director at Centaur Financial Services in Queensland, regulatory oversight is of “foundational importance” today.

“There is probably some recency bias to this, as it’s all we have heard about in the last 12 months,” Robertson says.

Last month, Professional Planner examined the prevalence of “look back” requests from the Australian Securities and Investment Commission, which can be traced back to a rolling surveillance program the regulator kicked off in 2015 to investigate how large institutions oversee advisers.

“I’m being engaged for advice on client file requests more than ever before,” said Hillary Ray, a partner with law firm Cowell Clarke, who added that the requests were causing “a lot of distress among advisers”.

Pressure from ASIC will only increase after the government boosted the regulator’s punishment powers – and their budget, by $127 million – in April last year. The Hayne royal commission lit a fire under the regulator with commissioner Hayne urging them to keep tighter reigns on the industry.

“There is significant focus on compliance, both existing and expected,” says Stephen Southwood, an associate director at consultancy group Forte Asset Solutions.

The licensee’s greatest responsibility, Southwood says, is shifting towards keeping red tape away from advisers. Helping advisers migrate away from grandfathered commissions within the next 20 months and finding the most effective path to meeting education standards is also included within that mandate.

“The majority of licensees we’ve spoken to have already undertaken an overall audit of their advisers’ education standings,” Southwood says.

Value bulwarks

While the need for regulatory support from licensees’ is on the rise, the importance of traditional ancillary service offerings is declining as providers circumvent dealer groups in favour of direct-to-adviser relationships.

The clearest example of this is in the investment platform space, where providers like BT Panorama are offering advisers the same pricing – in this case, 15 basis points – as they offer licensees. Despite scrutiny around BT’s offering, their campaign reflects a broader trend; advisers are finding that they don’t always need to rely on the scale of licensees for wholesale pricing.

The trend is not limited to platforms, according to Southwood.

“It’s true that ancillary support such as HR, practice support/business coaching, etc is broadly available from third party suppliers and often of higher quality,” he says.

Southwood warns, however, that when advisers – including self-licensed individuals – source these services themselves they lose valuable oversight in the form of corporate governance.

While he “agrees with the stats” in the poll, Southwood sees other bulwarks in the licensee value proposition besides regulatory oversight. Licensees still have a much stronger platform to manage product lists and insurance contracts, he says, “despite the rhetoric”.

According to Centaur’s Robertson, there is opportunity for licensees to set themselves apart in terms of value, it’s just that they haven’t stepped up yet.

“I think that if licensees were truly innovative this could become valuable, as I think the majority of advisers would like to have great project management support,” Robertson says. “It’s just that no one has done it so we have all gone our own ways.”

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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