More segmentation of advisers required in dealer groups

There need to be more restrictions placed on the types of products and strategies planners can advise on based on their level of accreditation, according to Professional Investment Services (PIS) general manager Grahame Evans.

Evans said there should be more segmentation of advisers in dealer groups, allowing only those with the right level of education and training to advise on certain areas of the market.

“I think what we’re going to see is a lot 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 market,” he said.

Evans believes that the biggest problem in the industry, which has grown from a “cottage situation”, is that planners have provided advice above their level of competence.

“This has certainly been brought home by the global financial crisis,” he said.

“When you see a variety of products that have failed … you’ve got to ask yourself: ‘did the adviser actually know exactly how that product worked?’ ”

Over the past eight to 12 months PIS has put in place restrictions which allow only those advisers with the right level of accreditation to advise on margin lending, structured products and direct equities.

“Being able to advise on margin lending … that process has been changed dramatically and I think the whole industry needs to take that onboard,” Evans explains.

He said in the future, advisers will need to “justify substantially” that they knew the product and that it was appropriate for the client.

“Therefore, to advise on certain products, you’re going to have to show that you’ve done the training and have the skill to advise on it,” Evans said.