You should never bet on luck as a strategy, which is why making the assumption the regulator won’t have a thorough approach to assessing the advice processes and practices among smaller licensees is in my view a mistake.

The first thing worth mentioning in this context is that ASIC’s budget in 2020-2021 is estimated to be $471 million, up nearly 20 per cent over the previous couple of years.

As the financial planning industry works out the path forward as a result of FASEA and the Hayne royal commission recommendations, as well as decreased valuations and increasing compliance costs, there is an assumption among some that ASIC won’t focus on the ‘small end of town’.

Many are placing bets based on this assumption, which I think is a mistake.

[Editor’s note: this is the first in a series of columns written by a compliance expert exclusively for Professional Planner considering the future impacts of today’s policy and regulatory decisions.]

Businesses need to plan for the fact that ASIC could come into their business. Explaining something away or saying “I haven’t done that sorry” no longer cuts it when you run a licensee. If they do come in, they are not going to worry about how you feel.

The $64,000 question is how, and will they come down to the small players. I think the honest answer is that no one really knows, but my guess is they will and over time they will work out the ‘how’.

First, some history relating to how ASIC has policed the advice industry in the past.


In my view, ASIC has suffered in its role because it has been underfunded. This has been evident because the majority of times we would respond to notices or provide ASIC with notification about ‘Serious Compliance Concerns’, you wouldn’t hear back.

Even when you were given what I call a “spray” notice – which covered a massive range of data points across a range of advisers and licensees with very little notice – you would scramble to get the information together, across multiple systems etc to hit a deadline that was not negotiable and still may not have heard back.

I’ve been told by those who work at ASIC in the past the regulator would receive so many notifications, it would often need to refer them to a special team and if based on a quick assessment there was nothing to see, you may not hear back, or you may be asked for files, but usually it was the former.

These days, the way ASIC is dealing with the resourcing issue – don’t forget ASIC also has a mandate to cover financial markets, company registration, super etc, so it’s not all about advice – is to focus on the big 4 banks and AMP (now the big 6 with IOOF) as these groups have traditionally accounted for 80 per cent of the adviser numbers.

Why this might change

I know advisers are joining smaller licensees based on ‘less onerous’ compliance regimes because of ASIC’s current focus on the big end of town – at the end of the day, 75 per cent of licensees have less than five advisers.

My view on advisers starting their own license or joining smaller licensees so they don’t get a knock on the door from the regulator is that it may be a false assumption for the following reasons:

  • The hold of the big 6 is disintegrating before our eyes and ASIC will come down to the mid-tier players at the very least and likely lower;
  • ASIC is starting to use data analytics to target advisers. Admittedly this is all based on lagging indicators (as that’s all we have), but expect this to continue;
  • The new Code Monitoring Body under will have a link to ASIC as spelled out in the Code of Ethics. This is more important than people are allowing for;
  • One single complaint can go to ASIC, sparking an investigation;
  • ASIC did not come off well from the royal commission and its current “litigate first” strategy is a direct result of that. ASIC will continue down this path;
  • There is the potential for a future change to the licensing regime.

Don’t bet on luck

As I said at the opening, you should never bet on luck as a strategy.

Business owners will feel more comfortable if they have all their policies in place: CPD is maintained, an accurate register is in place; consequence management is being discussed; annual audits are in place and properly discussed; there’s a complaints process; incidents are recorded; the Tax Practitioners Board has been notified; there’s a processes around renewing your AFSL and at the licensee level you discuss and record whether you should proactively notify ASIC of something occurring.

So, what should you do?

  1. Ensure your licensee compliance framework has depth and is as strong as it can be
  2. Embrace a culture of improvement around your advice process
  3. If you find something, put your hand up
  4. Try and get your house in order, as you can control that

My advice is to ensure the roof is as strong as possible while the sun is “shining”, then if the rain comes, you’ve done the work and it should put you in a much stronger position to weather the storm and come out the other side.

Conrad Travers is director of Tangelo Strategy & Advice Consulting, a specialist strategic risk and compliance management consulting company. He previously worked for ANZ/IOOF in a range of roles leading the shared service areas that support salaried and aligned advisers.

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