Licensees need to be ‘front and centre’ on data

Licensees should be entitled to controlling platform data as they are ultimately responsible for governance of advice by network operators, the Professional Planner Licensee Summit heard.

John Carnevale, research and investment services executive general manager for Entireti, told the summit that licensees need to be “front and centre around data”.

“We can co-exist with platforms, but if I’m a licensee, the platforms don’t know what our compliance rules and policies are,” Carnevale said.

“They don’t know what our APL [approved product list] is. They don’t know what special accreditations we’ve given to advisers, they don’t know our asset allocation approach. They don’t know that we’ve put a 5 per cent restriction on access to private credit [funds] or a total exposure of 20 per cent to private markets.”

The debate over who “owns” the client data dominated the summit last week with delegates contending this will remain a problem until there’s broad acceptance across all links in the wealth management chain.

Carnevale said licensees must remain on top of adviser oversight because it’s the licensee that is accountable if the adviser drifts out of any oversight guardrails.

“There are a number of advisers that just don’t use one platform, they use two or three platforms,” Carnevale said.

“You’ve got to have a holistic view of the client. You’ve got to have all forms of data in order for you to govern correctly and provide relevant counsel when that data, when scrutinised, raises alerts from an investment governance perspective.”

James Vernon, managing director and head of Aladdin wealth tech APAC at BlackRock, said Australia’s landscape – which has become dominated by the independent financial adviser (IFA) market – is unique compared to its regional peers that haven’t had a bank exodus from advice.

Vernon said it’s critical and a fundamental principle for advice firms to own and control their own data.

“From what I understand of Australia, we’ve got a multi-platform market and in many cases those practices will use more than one platform,” Vernon said.

“That’s quite unusual compared to perhaps other markets we operate in. Generally speaking, across Asia, the dominant provision of wealth management services is by the banks. The IFA sector doesn’t really exist elsewhere, perhaps a little bit in Japan and a little bit in Singapore, but the largest IFA in Japan has a billion dollars AUM [assets under management] so it has a long way to go.”

Investment governance was another key topic in the summit, with the discussion centred over the best approach to due diligence.

Vernon said the asset manager is a “big believer” in having a conversation with clients around portfolio risk and  the underlying portfolio risk exposures rather than a discussion about due diligence.

“What’s been really clear across the APAC region as a whole is the concept of portfolio risk has been very poorly understood over the last few years,” Vernon said.

“Now what we’re seeing in other markets around the region is this shift from product sale to portfolio. As the advisers are having a conversation around the portfolio context they’re using the risk analytics framework, to guide their client to a better understanding of what they need and why.”

Carnevale conceded that investment governance is taking up most of his time but the returns on risk for licensees are not adequate, compared to other parts of the chain including responsible entities (REs) and platforms.

“The licensees in that regard carry all the risk and no return – the REs are getting an RE fee, the platforms are getting a platform managed account fee,” Carnevale said.

“We’ve got to have the appropriate tools to be able to look at those portfolios especially where there’s performance issues or there are alerts that they’ve moved outside the guardrails that we as the licensee need to get involved in.”