Are self-licensed advice practices a concern for ASIC?
The corporate regulator has clarified how it monitors self-licensed advice firms and whether they are a growing concern.
Unpacking the risks and advantages of becoming a self-licensed advice firm continues to be a topic of discussion within the profession. Last month, Money Management examined the cost-effectiveness of running your own licensee and whether the expenses are worth the benefits it provides.
Meanwhile, new analysis from Wealth Data demonstrates that the vast majority of Australian Financial Services Licensees (AFSLs) with between one and 50 advisers fall on the smaller end of the scale. Just two licensees – AMP and Count – have more than 650 advisers each.
“[This] highlights the concentration of ‘small’ licensee owners, with only a few large licensee owners, which look like outliers,” commented Colin Williams, founder of Wealth Data.
With smaller licensees representing the bulk of the advice industry, a consultant professional has questioned whether advisers who are contemplating self-licensing are adequately prepared for the work it involves.
“My concern is that people going self-licensed probably aren’t as educated as they need to necessarily be,” Jaimie Ramsey, founder and principal consultant at Advice Business Consulting, told Money Management.
“When you go self-licensed, you don’t have anyone backing you. It’s your name and it’s your butt on the line if something goes wrong.”
While going down the self-licensing path can be a positive experience for the greater independence it offers, Ramsey cautioned that some advisers may lack the necessary compliance skills to interpret ever-changing regulatory requirements.
“People don’t know what they don’t know, which is a little bit scary because ASIC has never really turned their light on self-licensed firms. The target is painted on the larger licensees at the big end of town. I just wonder, if the [self-licensing] trend does continue, at what point will ASIC turn their attention towards self-licensed firms and how prepared they will be?
“I think some people at the moment are just like: ‘We’ll fly under the radar for as long as we can and hope that they don’t turn their eye on us’,” she said.
To understand if self-licensed practices are a growing concern for ASIC, Money Management contacted the corporate regulator for comment.
An ASIC spokesperson said the growth in the number of AFSLs with a single adviser was “fairly modest” in the past year and broadly similar to the growth of licensees with two to 10 financial advisers, and licensees with 11 to 50 financial advisers.
“Irrespective of the size of licensee, the same legal and regulatory requirements generally apply. ASIC’s focus, including enforcement activities, covers the whole range of licensees in terms of size,” the spokesperson commented.
Self-licensed firms were not pinpointed as a greater enforcement priority or concern for the regulator. Earlier this year, Sean Graham, managing director at compliance firm Assured Support, said it is a misconception that smaller firms or self-licensed advisers are less likely to be targeted than larger licensees.
ASIC continued: “We assist the financial advice industry to understand and comply with their obligations in a range of ways, including through publishing information and regulatory guidance. This is accessible on the ASIC website through a dedicated site which consolidates and centralises financial advice related content.”
Its website covers how ASIC regulates advice, licensees’ obligations when providing advice, educational requirements, alongside regulatory updates impacting advisers.
“ASIC is also developing a new Australian Financial Services Licence portal. The new AFS licence portal is intended to make the experience for anyone applying for an AFS licence more streamlined and user-friendly.”
The new portal it is piloting seeks to improve the process of applying for, varying, or cancelling an AFSL, and will also streamline the digital application experience by pre-filling information that is already known to ASIC.
AUTHOR
Jasmine Siljic
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