An independent cost–benefit study should be commissioned by Treasury or ASIC to verify claims made by the Financial Services Council (FSC) in its licensing green paper, according to financial services legal compliance firm Assured Support.
The green paper, which was prepared in conjunction with CoreData Research and released in late July, recommended introducing an adviser skills and performance registry, an accreditation framework for third-party compliance service providers and a tiered licensing framework.
But in its response to the paper, Assured Report says that while it shares the FSC’s commitment to reform to improve advice, and that the green paper makes a “constructive contribution to an important debate”, it disagrees with aspects of its framing and conclusions.
“When consumers suffer harm, they rarely care about business models; they care about recourse, clarity, and fairness,” Assured Support managing director Sean Graham said in the response paper. “So should the law.”
Graham was one of the critics of the paper after it was initially released and has since written a formal, 31-page response to the council, sent to Professional Planner. Assured Support clients include a variety of different licensee models.
Graham supported the FSC’s recommendations that strengthen the visibility of responsible managers, likely through a public register, so accountability rests with identifiable individuals.
The response paper said that rather than focusing on capital adequacy alone, reforms should include mutual indemnity schemes where all industry stakeholders contribute and compliance culture is treated as a core capital risk.
It also suggested that the FSC ask ASIC or Treasury to publish enforcement statistics segmented by licensee type so that policy is driven by evidence rather than anecdotes.
Graham was also critical of the cost savings cited in the green paper which suggested that practices with a third-party license save an average of $70,500 annually, a claim which was sourced from a CoreData research report titled The Value of Licensing.
“To present a gross figure of ‘savings’ without netting off the costs of participation is, at best, incomplete,” Graham said.
“At worst, it risks misleading stakeholders into believing that licensees deliver financial benefits where, in reality, the net outcome may be far less favourable.”
Graham also noted that any calculation on average savings notes that practices are receiving comparable services measured against a common baseline.
“The reality is that licensee services vary widely in scope, quality, and value, from compliance oversight to technology, training, and product distribution,” Graham said.
“Without clarity on what services were included or how costs were standardised, the claim of an industry-wide average saving lacks rigour. For some practices, the support provided may be indispensable and cost-effective. For others, particularly larger or more self-sufficient firms, the services may duplicate existing resources or add little value.”
While CoreData notes licensee satisfaction is up – which was used to justify much of the paper – Graham said this “collapses under scrutiny”.
“Evidence from ASIC and the [Hayne] royal commission demonstrates that large licensees with extensive in-house compliance resources were nonetheless at the centre of systemic misconduct and consumer harm,” Graham said, referring to ASIC Report 515, which found adviser audits were effective in only 18 per cent of cases, partially effective in 57 per cent and completely ineffective in 25 per cent.
Graham also noted that ASIC Report 562 showed that 75 per cent of advice files at vertically integrated licensees failed to demonstrate compliance with the Best Interests Duty.
