Three licensee heads are anticipating greater supervision from the regulator next years as the profession continues to bear the reputational burden of high-profile failures in the industry.
After the Dixon Advisory collapse saw the introduction of the Compensation Scheme of Last Resort (CSLR) in 2024, the profession has struggled through another challenging period following high-profile failures around the First Guardian and Shield Master Fund this year.
Despite the advice industry spending the years since the 2019 Royal Commission tightening regulations and compliance, Centrepoint Alliance chief executive John Shuttleworth told Money Management that he expects ASIC monitoring to increase as a result of the Shield and First Guardian collapses.
The regulator has already stepped up its surveillance of advisers’ use of managed accounts and private markets this year, flagging both as focus areas in its FY2025-26 Corporate Plan.
“We just know that ASIC are going to be more to be more vigilant. They’re going to be looking at licensees. They’re going to be reviewing files,” Shuttleworth said.
“They’re doing a deep dive into managed accounts. They already want to look at things like offshore arrangements, where people are using offshore paraplanners and assistance. Our view is that the regulatory monitoring and supervision will be on the rise.”
While many licensees have made significant efforts to tighten the monitoring and compliance of their advisers, Shuttleworth suggested the sharp eye of ASIC will likely see more acting conservatively in an attempt to avoid catching the regulator’s attention.
“This is going to have profound effects, and it’s just deeply disturbing for everyone off the back of the Royal Commission, we’re back in the space of dealing with just a few really bad eggs that have ended up leading to the collapse of funds and people losing their funding, I think, or their superannuation and investments,” Shuttleworth said.
He added: “The whole monitoring and supervision, of making sure the advisers remain compliant and fulfilling their obligations, I think every licence is focused on that at the moment.”
It appears no doubt that the major collapses this year have been a key driver of the regulators increased focus on AFSLs use of particular funds, and WT Financial founder and managing director Keith Cullen said the challenge will be ensuring government doesn’t overprescribe compliance requirements as a result.
“The danger is that policymakers become distracted by the noise of individual failures instead of addressing the systemic reforms the profession actually needs,” Cullen told Money Management.
“Licensees will need to balance stability, confidence, and clarity for advisers while continuing to drive reform at a time when the spotlight will be intense and not always well-informed.”
Meanwhile, Shuttleworth said it unlikely there will be any progress in getting the long awaited Delivering Better Financial Outcomes (DBFO) reforms over the line, which are intended to lessen the burden of unnecessary red tape for the advice industry, suggesting they might even pile on more requirements for AFSLs.
“We’re not going to be in the kind of political environment, while investors have suffered losses and there’s a perception issue in the industry, for that to get done.
“I expect we’re going to be sticking with the current regime for a while, and we might even see new regulation introduced, particularly around governance, managed investment schemes and audit that tightens that up to avoid some of the problems that have occurred.”
Morgans Financial Advisers director of wealth management, Marcia Senn, also flagged concerns the addition of more compliance and regulatory requirements could become a challenge as licensees work to stay on top of everything, “while still being able to do scalable, effective advice that is cost effective for clients”.
Shuttleworth added: “We’ve always had quite a high bar, but we have to be really, really cautious on what we do, and how we operate, and make sure the advisers understand that. You don’t want to be so restrictive that you make it difficult for advisers to do business, but we have an obligation we operate under a licence, and you have to comply with the licence conditions.”
