AIOFP backs continued role of dealer groups
Financial planning industry associations should not become quasi-regulators handing out penalties for poor behaviour, according to Association of Independently Owned Financial Professionals (AIOFP) executive director, Peter Johnston.
In an e-mail to AIOFP members, Johnston has expressed his organisation’s continuing support for the dealer group model alongside individual licensing, stating that dealer groups play an important role.
“The AIOFP has always been supportive of the current licensing regime, we think there is plenty of room for both the Dealer Group model and self – licensing of individuals,” Johnston’s e-mail said. “Some Advisers enjoy the benefits Larger Groups offer and others don’t, we think having choice will be beneficial to the industry and consumers.”
“We don’t think taxpayers will be happy if ASIC [Australian Securities and Investments Commission] needed to employ thousands more public servants to manage circa 14,000 additional individual AFSL holders,” he said in reference to suggestions around individual adviser licensing.
“We think Dealer Group’s play an important role with monitoring Adviser behaviour, they have a definite commercial interest in ensuring Advisers are acting diligently and in the best interests of their clients. This relieves some of the pressure on ASIC to monitor behaviour.”
“We don’t think Associations should become quasi-regulators handing out penalties for poor behaviour, that should be left up to ASIC/AFCA and the Court,” Johnston said. “The only roles Associations should have are referring poor Adviser behaviour to ASIC and acting in the best interests of its members, consumers and the industry in general.”
Johnston’s comments came after he highlighted his organisation’s ability to help advisers who established their own stand-alone business with support noting its professional indemnity insurance service to assist members.
As well, he said the AIOFP was in “advanced discussions with some Industry Super Funds and major Corporates and Unions to provide Advice Services to their employees and members”.
Dealer groups in their current format are a bane on the industry, they restrict new business entry to the industry through their exorbitant fees, and are nothing more than a shelter for the overinflated compliance and education industry that the Royal Commission created.
All planners should be individually licenced, and if planners require assistance they can purchase service packages from existing dealer groups such as mandatory annual audits.
Agree.
But the annual audits need to be based on what the regulator expects not what the additional layers of over-burdensome requirements the dealer groups have added.
Self licensed advisers can already obtain compliance services, including audits, from specialist compliance consultants. Compliance audits aren’t compulsory BTW, but most self licensed practices do them voluntarily as a risk management process. The current regime of compulsory AFSL audits focuses on financial viability issues rather than compliance.
If there was a big move away from dealer groups to self licensing, and ASIC really was concerned about compliance monitoring of larger numbers of advisers, it could easily be solved by bringing compliance into the compulsory audit regime. Existing compliance consultants could be authorised and monitored in a similar way to SMSF auditors. Over time, more compliance people from dealer groups will move to independent compliance consulting. Those people who claim “ASIC doesn’t want lots of self licensed advisers” are overestimating the problem, and underestimating the solution.
Dealer groups are just a contrivance to enable inhouse product distribution via “advice channels”. They are unnecessary and inappropriate. Removing them also removes a need for a large swathe of compliance, given so much bad advice is driven by inhouse product conflicts, and so much dealer group compliance bloat is designed to defend against perceived and actual inhouse product conflict.
AIOFP is continuing their trend of saying something really good one day, and something really dumb the next. Retaining dealer groups falls in the “really dumb” category.
Has the AIOFP received any funding from licensees? LifePlan, Synchron? This may then give you an idea on why this is their stance.
Advisers should be self licensed, but not under the AFSL model. There should be a single registration to an industry body (Single Disciplinary body?).
I wonder how much in collective revenue advisers pay to licensees each year? $20,000 X’s 16,000 advisers is a lot of money. It must be huge, and with little benefit to advisers and their clients.