Advisers at risk under licensees with fees cheaper than Dover
There are a number of licensees that offer fees that are cheaper than what Dover Financial Advisers offered that are potentially putting advisers at risk, according to CountPlus.
Speaking to Money Management, CountPlus chief executive, Matthew Rowe, said there were a lot of licensees that offered very cheap licensing solutions and that there was a potential lack of understanding of what their real obligations are under supervision and monitoring.
“At one end we’ve got over engineering – over legalistic interpretation of compliance – and at the other end licensees that have really cheap offers out there that outsource compliance, and there’s probably regulatory arbitrage there. They’re probably not meeting requirements as a licensee and potentially putting advisers at risk,” Rowe said.
“We know there are licensees out there at the moment that have fees cheaper than what Dover had. We don’t think that’s a sustainable offer and not in advisers’ interest to be going down that path and not in consumers’ interest.”
Rowe said with the work that still had to be done with the compensation scheme of last resort (CSLR), he could potentially see a capital requirement to mitigate the moral hazard within CSLR.
He said a firm with no capital that was put into administration or liquidation would then have consumers that suffered under CLSR and the rest of the industry would have to pay for the people that were not acting in good faith.
“I think if there’s a capital requirement potentially that comes out around this to mitigate moral hazard that’s a decision for the government,” he said.
“I think licensees should have an obligation to demonstrate that they do have capital in case there is poor behaviour and back themselves and not relying on professional indemnity insurance, and licensees need skin in the game to support advisers and consumers so that if something does go wrong they stand behind advice and not just put the entities in liquidation and the consumer loses out on the result.
“If that comes about that could shake up the licensee landscape.”
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