A shifting “advice diaspora” will mean the attention of the corporate regulator will begin falling upon advisers licensed at smaller dealer groups , according to CoreData founder and principal Andrew Inwood.
Presenting at the recent AIA Adviser Summit 2021 digital conference, Inwood showed data illustrating how the institutional exit from wealth management has rapidly changed the shape of the industry, which he says will in turn change the way ASIC conducts its regulatory responsibilities.
Instead of a top-heavy landscape there are now four tiers that almost equally represent the advice industry; six “tier-one” licensees with over 500 advisers (5601 advisers total), 26 “tier-two” licensees with 100 to 499 advisers (5363 advisers), 202 “tier-three” licensees with 10 to 99 advisers (5354) and 1060 “tier-four” licensees with two to nine advisers (3843 advisers).
There is also a smaller group of 801 “tier-five” self-licensed advisers, he noted.
“If we break the industry up into 4 [main] segments they’re all about the same size except the single adviser,” he explained. “You can see they’re all about the same size and all reaching about the same number of consumers.”
The interesting thing about the landscape as it lies now, he reckons, is that these groups aren’t regulated in the same way.
“The regulation force sits on the top group because they’re easy to see and they’re transparent. The rest of the industry is, as yet, I would say, unregulated,” Inwood said, before adding that this scenario “won’t last forever”.
ASIC will start paying more attention to the a broader palette of groups, Inwood explained, in line with the flattening out of the licensing space. When that happens, and the speed by which it occurs, will have a lot to do with who replaces James Shipton as chair of ASIC and the kind of regulatory regime they intend on implementing.
The fact that advisers in smaller licensee groups haven’t dealt with as much regulatory scrutiny is not an indictment on them or their business practices, he explained; it’s just the way regulation works.
“This is by no means to suggest that any of those businesses are doing anything wrong, it just means that they haven’t yet felt the force of regulation,” he said.
What the regulator’s attention will mean, however, is another “input cost” for licensees and advisers.
“One of the things which has really hurt the superannuation sector in the last 12 months is the amount of attention they’re getting from APRA and ASIC and the costs of dealing with that,” he said, before noting that advisers “know perfectly well the cost of a review”.