Questions are being asked about how much more financial resource will be demanded of small financial planning groups to accommodate the Australian Securities and Investments Commission’s (ASIC) upcoming reference-checking and information sharing regime.
At the same time as financial advice licensees are competing to take advantage of IOOF’s acquisition of the MLC Wealth advice businesses, they face having to make sure that they have done adequate reference checking on both individual advisers and advice practices.
The major licensees have also signaled they are keeping a close watch on the opportunities which may arise as AMP Limited moves towards finalising the reshaping of its advice business.
There is also concern that the regime, when implemented, will put increased pressure on smaller licensees and self-licensed financial advisers who do not boast the resources of the major dealer groups.
ASIC began the consultation process around the new reference-checking and information sharing regulatory protocols in November last year and closed off industry submissions at the end of January.
But what is clear is that there is a strong belief amongst the major groups including the Association of Financial Advisers (AFA) and the Financial Services Council (FSC) is that primary responsibility should reside with the recruiting licensee (the licensee looking to employ the adviser).
While the AFA expressed concern about the ability of small licensees to have the resources necessary to conduct comprehensive reference checks, the FSC suggested that they should have the ability to outsource the task to third parties.
It said that recruiting licensees “should be able to use the services of third parties to obtain references. If a licensee proposes to outsource reference checking, the licensee should impose obligations on the third party consistent with the licensee’s obligations, but not to impose a requirement that the recruiting licensee obtain the consent of the prospective representative to the engagement of a third party for reference checking purposes”.
The full scope of the new ASIC reference-checking protocols is expected to become clear before the middle of the year when the regulator is expected to release the regulatory instruments resulting from industry consultation arrangements.