Concern over growth at the expense of compliance

Dealer groups with a mission to grow should be cautious of the risks larger planner numbers have on compliance, Avenue Capital Management director of compliance Mark Lewin has warned.

Increasing planner numbers create an opportunity for compliance to slip, Lewin said.

“How can you just keep adding names and numbers and still keep your compliance record up-to-date?” he asked.

Lewin believes there should be more filtering of planners within some dealer groups.

“You’re after someone who is not going to be a threat to the dealer group and a threat to the professional indemnity insurer,” Lewin advised.

Avenue, which has 36 authorised representatives and 16 offices, is expecting to add three or four practices in the next 12 months.

The managing director of Professional Investment Services (PIS), Grahame Evans, did not see any correlation between the size of a planning group and compliance issues so long as sufficient processes and systems are in place to prevent problems.

“It’s not actually how big or small you are, but by the nature of being big you need to have good processes and systems so that nobody slips through the cracks and causes you a problem,” Evans said.

He believes there will be more segmentation of advisers in the industry, which will see restrictions placed on who can and can’t advise on certain products and services.

“I think what we’re going to see is more restrictions around what people can do until they can actually show and justify that they are capable of ... dealing in certain parts of the industry.”

Over the past 12 to 18 months, PIS has placed restrictions on its planners, determining who can and can’t advise on margin lending, structured products and direct equities.

AMP Financial Planning managing director Michael Guggenheimer said he also did not see a link between planner numbers and compliance.

“I don’t necessarily believe that growth and the responsibilities for supervision are inextricably linked.”

He said despite the planning group’s size it maintains all of its supervisory responsibilities “no matter what”.

“I don’t believe in our case that we are acting any less responsibly because we’re growing.”