Small licensees not immune from ASIC surveillance

licensees compliance adviser registration professional indemnity PI insurance ASIC

12 February 2024
| By Laura Dew |
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Smaller licensees should be aware that they are just as much on ASIC’s radar as their larger counterparts as increased data and technology means the regulator has greater transparency than ever, according to a compliance expert.

Speaking to Money Management, 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. 

“That might have been true in the past, but now two things are very different: the regulator is much more data-driven, and secondly, there is mandatory complaint reporting as well as breach reporting. 

“ASIC’s capacity to pick signals from those reports and integrate data is greater now, and if ASIC is seeing signals of a problem, then they won’t care whether that’s from a big group or small one.

“There is less capacity for firms or advisers to be ‘invisible’ anymore post-royal commission, and ASIC’s systems have much more intelligence out there so they are kicking the tyres.”

As a result, it is important that advisers understand their obligations before setting up on their own to avoid being penalised by ASIC for an easy mistake. This includes registering advisers on ASIC’s new adviser registration by 16 February and filing their first internal dispute resolution (IDR) reports for the last six months of 2023 by 29 February.

“The regulator is more active now and the obligations have increased, so more of your time is concerned with that than you might expect. You get your freedom [by being self-licensed], but if you don’t understand your requirements, then you will end up with more work. We see a slow dawn of awareness on advisers sometimes as they understand the real cost and spending less time with clients,” Graham said.

He also noted the firm had found smaller, regional firms were actually likely to be among the most compliant as they were under the scrutiny of their community more than those in the CBDs.

“We find advisers will be more compliant in those regional areas than in the CBDs as they see their clients around town, at the shops and at the footy, so they know they can’t make mistakes. There is a greater level of transparency in those areas.”

All this had resulted in the outcome that professional indemnity (PI) insurance fees, which are seen a large cost of running an AFSL, may be lower than expected as smaller licensees. PI fees are based on the type and size of business, how much turnover they have, their claims history, and the industry they work in. 

“Small licensees don’t have the same risks as the larger ones, and the risk profile is very different to an AMP, for example. They don’t have to worry about other advisers in the network ruining the brand or their reputation, and they have their personal relationships on the line.”

This was echoed by founder of Forte Asset Solutions, Steve Prendeville, who said it was not necessarily the case that smaller licensees would have more expensive PI than larger ones.

“Those within licensees are warned how much more expensive PI would be on their own, but it actually can be lower because it is correlated with the risk taken and, as a director of their own business, people become more risk-averse and more focused on compliance.”

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Submitted by Duke Nukem on Mon, 2024-02-12 08:57

Hiding from ASIC was not the consideration for setting up our AFSL. The bullying, coercion, outright lies and lack of support plus blatant conflicts of interest is what pushed many of us away from the large licensees. With the right external compliance manager we get all the support we need to get things right.

Submitted by Baffled on Tue, 2024-02-13 17:40

Dealer Groups are a cancerous blood-sucking leach, on the Advice landscape. It's not about more freedom at all...It comes back to being more Professional and having a higher moral compass.

If more Advisers became self-licenced and realized the %@# involved, that duplication, the red tape, the @$@% number of ASIC websites, that is all hidden behind dealer groups...then they wouldn't put up with the @$$. All that duplication, red tape, and Government inefficiencies in order to create more Public Servants who are too busy finding spelling mistakes in FDS to investigate the $3 billion lost in scams, is all hidden behind Dealer Groups. What has that outsourcing cost our society.

Dealer Groups love that complexity, they love the duplication, and rarely speak up or rock the boat because it's good for them, and that's the reason you and Australians are suffering from bad legislation cause it's good legislation as far as dealer groups are concerned. Large Dealer groups don't pressure representative bodies or Lobby Government for's good business.

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