Self-licensed advisers using dealer service providers that outsource elements of their services package are taking on extra risk, according to the chief executive of LaVista Licensee Solutions, Mike Pope.
While there are reputable dealer service providers on the market – Pope names Centrepoint’s AAP among them – he says there are a similar number of providers that can only take advisers part way through the self-licensing process. These providers rope in externals to provide services they can’t provision, such as lawyers and and HR specialists, which leaves advisers without a single source of truth and in a compromised position.
“You don’t want to have mixed messages from different teams,” Pope says. “That’s where the adviser starts to second guess and it breaks down.”
These breakdowns can lead to the Australian Securities and Investments Commission rejecting the adviser’s AFSL application, Pope says.
“If a service provider has done a review and a second person is providing compliance manual, but they’re not consistent with what they’re supposed to be doing and they’re misreading ASIC, that’s where the practice can come into trouble,” he adds.
Pope explains that ASIC is put off by inconsistencies during the AFSL application process, and if there are any changes in the regulatory process this needs to filter through the entire service provider spectrum. “The auditor, compliance manager, they all need to know these changes have happened… so the client can run their business without worrying about it,” he says.
If the dealer services provider is using externals this process can break down, Pope notes. Not having a single point of accountability compounds the problem because there is no single source of truth.
“If you’re using a lawyer or a small company to do just one part of [the AFSL application] the real risk is you assuming you’re doing it correctly but you haven’t got any other checks and balances,” he says. “The downfall comes if you do get an audit from ASIC.”
LaVista is the dealer services offering for listed licensee Clearview, which licenses around 230 advisers under the Clearview Financial Planning and Matrix Financial Advice brands. Launched in November 2018, LaVista offers advisers both off-the-shelf packages including “essential dealer services” such as templated documents and compliance manuals, or the option to “cherry pick” services from a menu that includes monitoring, marketing and software support.
According to Pope, being able to offer an off the shelf package that is run internally gives advisers a layer of risk mitigation.