AFA chief executive Philip Kewin told ifa a potential change to individual registration of advisers from the current licensing system could be “more disruptive than beneficial” given financial planning firms were already having to cope with the requirements of the FASEA regime and forthcoming royal commission legislation.
“It’s certainly not our highest priority in terms of policy platform at the moment, it’s not something we’ve been advocating for and we think the issues are more complex than just licensing,” Mr Kewin said.
“[The change] would require a lot of consideration and frankly there is so much change going on in the industry already at the moment, that is why it’s not our biggest focus.”
AIOFP executive director Peter Johnston echoed Mr Kewin’s comments, saying the idea to reboot the licensing system was poorly thought out and came at a time when advice firms were already struggling under the weight of other changes.
“This is the flawed thought process of individuals who have no advice experience and hail from the institutional sector,” Mr Johnston said.
“Just when we can see some light at the end of the FASEA/LIF/COVID tunnel, the FPA throws in some more turmoil.”
Mr Kewin said the option to be self-licensed was already available to advisers, many of whom had not taken it up due to the prohibitive costs and inefficiencies involved.
“You need to look at the scale of licensing system and one of the benefits of the system is you have AFSLs who act on scale. That gives benefits in terms of efficiency of delivery, being able to leverage best practice and repurpose a lot of information across a larger group” he said.
“Moving to an individual licence then effectively puts those responsibilities in the hands of individuals.”
Mr Johnston agreed that many of the current barriers to self-licensing would remain if the system was transitioned to individual registration of advisers.
“The commercial conundrum is having sufficient scale and buying power to get the ancillary services required to operate – PI cover, compliance, research, training, the list goes on,” he said.
Mr Kewin suggested the idea could also be a difficult sell politically, with ASIC unlikely to want to monitor advisers at an individual level and the government already facing a backlog of legislative change that it had committed to following the royal commission.
“From the regulator’s perspective, at the moment they have the opportunity to go through a licensee, and certainly if not done well it can have adverse consequences, but it also has the advantage of being able to address a number of advisers at scale,” he said.
“We’ve also already seen that the government wants to work to a strict timeline on the royal commission recommendations, and the consideration that would be attached to any changes to the Corporations Act would mean considerable change that would potentially threaten the timeline of the implementation of those recommendations.
“I can’t speak for the government, but anything that would slow down the implementation of the current reforms wouldn’t be seen as favourable.”
The FPA’s big mates drop their bundle and run out of town so it’s time for a new system and disciplinary body. That’s nice. I wonder who will be putting their hand up to do the job ASIC reckons they can’t… maybe the FPA?
FFS just stop with the change!!! We’re going through enough. Let us be and then revisit huge changes. I feel like FPA is just ‘looking busy’ so they can justify the fees they charge their members.
Just when I was definitely not going to renew my FPA membership. There might be hope for them yet. It’s a good idea and could resurrect the industry imo.
So cards on the table – we run a collegiate license where no third party shareholders need the AFSL to make a profit.
It meets its RG166 financial requirements and professional standards are provided by employed and outsourced resources with practices billed each month to cover the Licensee costs.
I don’t want any of you to join us so no axe to grind or conflict.
I look at this strategy and would argue it just means a lot of extra ‘consulting’ fees for the outsourcers out there, with no economies of scale. Driving fees back into every advice practice and having every practice provide tailored solutions is impractical and simply way to expensive.
The old world of dictatorial AFSL management teams promoting product through their advisers is gone but the legacy of FSR, FOFA, LIF, the RC and FASEA live on. There are so many traps for well-meaning but inexperienced advisers that you will be sitting ducks for AFCA and ASIC and no ASIC will not suddenly become facilitative.
Accountants do not have an aggressive regulator focused on everything they do and nor does the legal profession. Simple question, which govt body regulates them? ASIC looks at accountants in the advice segment but then it is professional bodies, the Law Council and some state regulators. We have a government behemoth whose is mandated to watch everything we do.
There is value in aggregation – not financially any more – but in services that can be agreed and imposed on an advice network. There is safety in numbers as colleagues can openly discuss the application of regs and principles and agree a way forward. There are economies of scale for clients when negotiating administrative and funds mgt discounts and lastly there is collegiate support that can help build best practice with the sharing of ideas.
The AFSL has or is changing but I think there is an argument that moving back into a market garden type structure will only make advice more expensive and probably lead to worse consumer outcomes.
I bet your “collegiate AFSL” uses an inhouse product arrangement of some sort like SMAs, practice administered SMSFs, or white labelled Wrap. There is a “collegiate expectation” to recommend these products to clients, and you make additional profit from them via shareholdings in the AFSL or offsetting of AFSL fees. At the end of the day your AFSL is an “AMP lite”. Because your AFSL is a conflicted, vertically integrated one, you need to have multiple extra layers of compliance overhead to shield you from the extra regulatory heat that draws.
It’s amazing how much simpler and cheaper compliance can be if you are just a financial adviser, and not an inhouse product distribution channel.
Lots of these comments seem be coming from people that either own or work for an AFSL. Just the language you use. A few on here trying to talk it down to save their own skins. Take a step back and look through our eyes. As you can see from the comments here for example a majority of advisers really want this change. Not the cumbersome self licencing that exists today, we want alternatives, like some of the ones suggested here, we don’t want to pay dealerships fees for no service.
Look the AFA and AIOFP are 100% right. Accountants can do this sort of thing because they are smart people. Along with the AFA and the AIOFP, we all know that advisors just wouldn’t be capable of doing it themselves, they need institutions to do it for them. It’s just the FPA standing up for institutions again.
This is the future.
I have the required qualifications and i have passed an exam (FASEA?) i provide evidence to ASIC and they say i can provide advice.
I then join a body that holds me accountable to the code and is available for guidance. They report me to ASIC if they have concerns.
I then interview a compliance consultant and pay them on a fee for service basis for whatever help i need.
I interview CRM and software providers and buy the one i like
I interview research and pay the one i like.
I interview education providers and use the one i like.
I review product providers and place my clients with what is best for the client..etc etc. See the point. I can change any of these providers whenever is suitable without drastic changes to my business. It will mean all these providers will have to earn their money and provide value, otherwise i go somewhere else. I’m no longer trapped.
This model could actually reduce costs by thinning out dealer group and product provider support staff, many of them who make up numbers to take fees from our clients.
Many of the requirements we have are to stop selling in house conflicted products. If there are no in house products, and i’m selecting on merit, a lot of this ‘patches’ aren’t needed. I can spend my time reviewing clients more often because the paperwork burden is reduced. (note i still have a best interest obligation. I don’t want to get away from that)
Dealers and products will cry at this because it will increase competition for them and they will have to be relevant and value and can’t just take money for nothing because they have the biggest network.
I already pay tens of thousands of dollars for those services listed. The price would probably come down if the providers had to be competitive.
Keep the exam date and study deadline as it is. Make all dealer groups complete a look back program and start the new system 1 Jan.
Make it happen.
Brilliantly encapsulated!!
One of the most erudite pieces that I have read here. Well done “anonymous”!
Do you not have the choice now to be self licensed? I agree the benefits you set out are attractive but what’s stopping you right now?
I became self licensed because I believe Advisers should be personally held accountable. I did not do it because it was easy or it was cheaper. I did it because I believe that ‘s what needed to be a Profession. With professionalism comes less Government intervention and affordable advice for all Australians. My compliance and processes are much better, I am more accountable, because like most self licensed advisers, I live in constant fear of ASIC. I am quite selective on the clients I provide advice for. It is for those reasons why I believe we’ll still need institutional advice and self licensing is not for everyone. I’ve done my exam, I’ve completed a Masters, I treat my clients like family. I gain great pride in knowing I am doing everything I can possibly do to create a better industry for those that come after me.
I will not be renewing my membership of the FPA because the FPA puts the needs of the FPA first, not advisers or Australians and being a professional and being a member is impossible. I don’t want them to be advocating for me and they’re not the body to be driving this important issue
I agree this is poorly thought out by the FPA. Its just more straw clutching. Dante has lost all confidence as have the FPA and he needs to move aside.
A new direction for the FPA can npt and will not be achieved with the same old leader of old policy – DANTE MUST GO.
Again, all of the objections to this idea are rooted in the assumption that we HAVE to have licensees. So it’s all about putting better lipstick on the same pig.
No.
Instead, the question should be “if we were to start again, how would it look?”
Would it be:
1) an expensive ‘middleman’ creating their own individual rules and guidelines that each differ from the legal obligation, while creaming out hundreds of millions dollars a year from advisers and clients or;
2) professional advisers individually licensed to operate within a clear regulatory framework with consistent rules and requirements?
The AFSL system is broken – let’s start again and make something that works for advisers and clients.
Not the snouts in the trough.
For once.
Exactly my point Accountants, Lawyers and Doctors all have PI yet they don’t need licensees.
Both these heads of AFA and AIOFP have vested interests with the licensees and large dealer groups they don’t represent the views of advisors, I am glad I am a member of the FPA, I would ask other advisers to contact these 2 other bodies if your members and tell them they don’t represent your views and if they don’t change their stance cancel your membership and move to the FPA
Who are these guys kidding the scale only benefits the licensee not the authorised representatives they have to deal with a large licensee who doesn’t care or listen to the authorised representatives needs and more importantly the clients.
Why is scale so important for a licensee because they can push the products they create into the APL and force their authorised representatives to only use those products because their supposed compliance teams see issues with other products please don’t BS me.
All these efficiencies and delivery benefits go towards the owners of licensees not authorised representatives and the clients if not then why has the cost of being an authorised representative being going up with larger licensees.
Can anyone please provide me with some logical points as to what the benefits of a large scale licensee has over a financial planners being individually registered, I can not see any.
If we abolish this need to be authorised under a license and move to individual registration I would be able to pass this cost savings on to my client and reduce fees by up to 40-50% but currently my licensee takes that for doing absolutely nothing they don’t know the client they don’t research and provide an SOA, all they do is come once a year pick through files and arbitrarily try and find compliance issues to justify their jobs, we have our own compliance managers so there is no need for this.
This is exactly what planners need with all this change something that will reduce costs and the unnecessary burdens licensees put on advisers so it is actually the perfect timing, the FPA has it right and these other bodies have it wrong and if they truly came from a advice background they would understand our needs but they don’t they are backed by the institutions and licensees hence why they are trying to protect them not advisers
Our Licensee is so useless and incompetent they have even tried to force us to sell clients investments when the market has been going down to reduce the risk to the licensee and then they tell us we should be buying when the market is going up, that is amateur investor behaviour how can I make money for my client if I buy at a high price and sell at a low price, honestly any amateur knows that is not the way you invest, clients come to us for professional investment advice.
AIOFP are not in the game. Have AFA just dealt themselves out? All the issues Philip Kewin mentions can be dealt with through a partnership model, similar to lawyers and accountants. These partnerships could be the current licensees (in some cases) or new entities, though they should ultimately be adviser owned, same as lawyers and accountants.
This is a great proposal by the FPA and the timing is perfect. For the first time in a long while the government is not completely sure that tightening the screws on financial advisers is the only way to go – we just showed our usefulness. The FPA proposal will allow us to move towards professionalism. Individual advisers are already fully liable, why should our service providers also be liable, adding huge extra costs to advising clients.
I congratulate the FPA for taking the lead. Just because it’s hard in the short term isn’t a reason to disregard the idea. If 150,000 accountants seem to be able to operate this way why can’t 23,000 financial planners.
This proposal means the centre of financial planning is the financial planning professional, not other third parties, some with vested interests. Good quality licensees would quickly morph their proposition to help the adviser meet their individual obligations.
For this to work it’s essential financial planning becomes a legally recognised profession under Professional Standards legislation. This way advisers will have a public liability scheme working alongside PI insurance. And as aside most PI brokers at the moment are finding it easier to cover quality, self licensed practices vs the CAR model, so that argument doesn’t hold either.
Why stick with a system that’s broken and hasn’t worked. Sometimes a bit of courage is needed to shift the dial. Who knows tax deductibility might be on the table.
Agree, except for the stupid “shift the dial” drivel.
Mate show some guts and quote your name
Not your mate
Oh Tom, I actually thought those comments made sense and then….. I’m not the person who replied but, that website of yours is like a candy to anyone who disagrees with you. Be careful. Try speaking out against the FPA…. I dare you Mate and then you might appreciate why some prefer to remain unknown.
Are you a child? Or just a gutless child? The guy has the courage to put his name to his well thought out views and your first instinct is to go the person? You epitomise everything that is wrong with the old conflicted problems in financial planning that is holding us back. Just retire and move on. Martha MacGoonigall? More like Gutless Spiv.
what a joke why do we have two industry bodies that in itself is useless but when they disagree with each other it is just embarressing. Get rid of both them, get rid of dealer groups get rid of all the leaches on the advisers backs
With Kerwins support of AFSL’s he states, “That gives benefits in terms of efficiency of delivery, being able to leverage best practice and repurpose a lot of information across a larger group”
If AFSL’s are scrapped, and the FPA & AFA (etc) are merged to create a Industry Body responsible for oversight and enforcement of adviser registration, compliance and code of ethics, then it will streamline everything, and create a uniform process that creates greater efficiency, in terms of compliance, leveraging best practice, and repurposing information across a larger group. Kerwins argument is incorrect, and the structural change proposed by the FPA will be a much better solution than what we have now.
20 years too late or 10 years too early. We need to level the playing field by getting rid of AFSLs for anything other than product flogging, ban those AFSL from providing any sort of advice or having any “advisers” incl super funds and comparison websites, and fix onerous parts of Code FIRST.
Has Kewin even read the FPA proposal? It would not involve ASIC at all. It would remove ASIC, TPB, FASEA etc from financial adviser regulation and simplify the whole landscape.
Some people are calling for a merger between the associations, but if this is the reaction from Kewin and Johnson then perhaps that’s not such a great idea. They seem to be clinging to the conflicted vertically integrated dealer group model. Something the FPA has long been accused of, but is now clearly distancing itself from.
BTW it’s not just the big instos like AMP & MLC that are vertically integrated. Every dealer group with inhouse or white labelled products is. That’s the business model being pursued by the next generation of mid sized conflicted dealer groups, particularly those that have come out in opposition to the FPA proposal.
Agree entirely. Some many vested interests………it is difficult to keep track of them all.
FPA grabbing at straws to stay relevant.
Wrong idea. Wrong time.
I never thought I’d say this but the FPA are acting like the AFA several years ago and vice versa. This is what you get when you try to get a boy to do a man’s work. The AFA are more sensible and rational these days…crikey did I just type that too :-O
Just to confirm ” Will the real Agent 86 stand up ?”…because the individual who has utilised Agent 86 as their identity is a fake.
If you have something to say, it would be appreciated if you cease using another respondents title in an attempt to corrupt the opinion and imitate someone else.
Desperate and manipulative at best.
Dante – resign NOW
well said. His continued tenure reflects personally on FPA members.
Mate show some guts and put your name to it. All this anonymous stuff is pathetic.