Advisers at risk from DDO rules

WealthO2 managing director Shannon Bernasconi said ASIC’s design and distribution obligations, which begin to come into force in October, would put further pressure on advisers to be able to drill down into the detail of what their clients were invested in and whether this was suitable for their needs.

“In the wake of DDO, the ability of advisers to quickly slice data into higher risk asset classes, and to easily drill further into the holdings of clients or of the managed accounts that are recommending those assets, is more important than ever,” Ms Bernasconi said.

The obligations place a host of new restrictions on both issuers and distributors of financial products, meaning advice licensees must take “reasonable steps” to ensure products are only distributed to the target client segments for which they are intended, according to ASIC guidance.

Ms Bernasconi said in response to this WealthO2 had recently included the capability for advisers to see overall exposure by asset class, and the individual securities within the managed accounts clients were invested in on the software platform.

“By providing advisers with this ‘birds eye view’ it helps them identify whether there is a client wide need to rebalance portfolios in response to changing market conditions, risks and opportunities,” Ms Bernasconi said. 

“It also allows them to identify if a rebalance is needed as a result of a change in the firm’s investment strategy, to assess whether portfolios are over or under exposed in a particular asset class or security.”

“If there is a change in the investment strategy requiring blanket advice to all clients who hold a security, the new functionality can help by managing bulk records of advice (ROAs) or bulk switches, and more easily identify which portfolios need to be reviewed.”

Ms Bernasconi added that WealthO2 had grown to $2.25 billion in funds under administration in 2020 during what had been “a challenging year for advisers”.