Self-licensing to stretch firms and regulator

Tahn Sharpe

By

June 6, 2018

The head of Affinia Financial Advisers has told fellow industry members that many self-licensed firms lack the skills to meet their obligations and will increasingly find themselves under the microscope of the regulator.

Speaking at the Professional Planner Licensee Summit in the Blue Mountains on Monday, Marcus O’Sullivan said the number of licences being granted to advice firms was “pretty scary”.

“The issue – and obviously most of us in the room are licensees – is that there is a difference in skill sets between a financial planner and a licensee,” O’Sullivan said. “A lot of self-licensed people are practitioners, so they’re making licensee decisions with their practitioner hats on.”

O’Sullivan was joined onstage by Financial Services Council chief executive Sally Loane and Financial Planning Association chief executive Dante De Gori, to discuss the role of licensees and their changing place in the advice ecosystem.

Adviser Ratings data shows there are 507 self-licensed entities that did not exist 22 months ago and 488 of those have fewer than 10 registered advisers. As reported in Professional Planner, smaller firms are becoming less intimidated by the self-licensing path and are increasingly willing to undergo the regulator’s vetting.

O’Sullivan said problems arise because these firms don’t have the wherewithal to meet the requirements for retaining an Australian Financial Services licence.

“The amount of infrastructure, as we all know, that you need to have to support your AFSL and to meet your obligations under the Corporations Act is huge,” he said. “A lot of these small licensees don’t have it.”

Affinia Financial Advisers is a wholly owned subsidiary of TAL and had 130 advisers on its books as of March this year. It is the 37th-largest licensee in the country.

“What we’re going to find is that a lot of these small licensees will come into the crosshairs of the regulator, and I’d say the regulator is going to struggle to resource up and deal with it,” O’Sullivan said. He added that ASIC is “already struggling to regulate the players in the market as it is today”.

Something has to change, he argued. If that something is not the regulator, or the number of licences being granted, then it might be the licensing model itself.

“The licensing model we have today, where you have a dealer group, corporate-authorised reps, and authorised reps…that’s probably coming to the end of its life span,” O’Sullivan said.

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