Danielle Press

In the wake of the Hayne royal commission, as big banks exited the financial advice arena and the number of advisers authorised by the biggest licensees plummeted, the corporate regulator faced the growing issue of how to effectively protect as many consumers as possible from poor advice.

When the space was dominated by a handful of large licensees it was relatively easy to focus on the very big end of town as an efficient way to cover the greatest number of individual advisers and, by extension, prevent or mitigate harm to the greatest number of clients.

It was also handy the large licensees had the financial resources to compensate or remediate clients when necessary. But the equation changed as advisers that had previously been authorised by banks moved to smaller licensees or obtained their own AFSLs. For a resource-constrained entity like a regulator, that became headache.

Danielle Press, a former CEO of Equipsuper and senior executive at UBS Asset Management, finished her five-year term as ASIC commissioner last September.

In her first interview since leaving the corporate regulator, she tells Professional Planner that what kept her up at night was how to deal with single operators.

“The challenge for me as we move away from large licensees, which is where we were 20 years ago, to being more fragmented, is how does the regulator actually oversee that broad fragmentation of advisers?” Press says.

“When you had five or six licensees, you basically just looked at the licensee and the licensee was doing much of the compliance work for the regulator, whereas that doesn’t occur in the smaller operators.”

Press’ comments come amid industry debate about how the regulator can effectively police a scattered advice sector, with CoreData Research founder Andrew Inwood suggesting it could be the next regulatory failure, while AdviceIQ general manager Paul Harding-Davis countering that PI insurers will charge less to self-licensed firms and are considered less risky.

As a regulator ASIC was often criticised for an over-focus on the top-end of town, while allowing smaller licensees and own-AFSL firms off the hook. Press disputes the idea that it focused more on big licensees.

“In fact… I’ve heard the argument from the small operators time and time again [that] you’re being unfair on us and asking us to do too much and asking us to be like a large operator, and we can’t be,” Press says.

But there’s no doubt that when it focused on big licensees ASIC’s actions had a much greater impact, were much more visible, and resulted in higher remediation or compensation figures in total dollar terms.

Press says the regulator views its actions through the prism of preventing harm to the greatest number of individuals possible, “and when you’re thinking about harm, if you’re looking at a licensee – be it medium or large – the harm is more clear, because [the licensee is] harming many, many clients, as opposed to one or two”.

“Unfortunately, the [harm to an individual] is equally as bad, if not often worse, at that very small end. But collectively, if we’re thinking about allocating scarce resources, do I want to protect 100 people, or am I going to protect one person?”

Press says this is the trade-off a regulator considers every single time action is taken.