Dover must be a catalyst for change

When more than 400 financial advisers are left in limbo because their licensee opts to discontinue business and suspend their authorised representative (AR) status it suggests there is something fundamentally wrong about who “owns” the client within Australia’s financial planning licensing regime.

As things currently stand, it may be the Dover financial planners who “own” the relationship with the client but it is clearly the licensee who “owns” the regulatory/contractual relationship and has a residual power to end it.

Let us be very clear about what has happened with respect to Dover Financial Services. The licensee made a notable appearance before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. He also engaged with the Australian Securities and Investments Commission (ASIC) over regulatory/licensing issues. The licensee then, of his own volition, decided to suspend the Dover AFSL and revoke the authorised representative status of its advisers.

Despite being in discussion with the licensee in the days and weeks leading up to his decision, ASIC was unaware of the licensee’s ultimate intentions and consequently found itself wrong-footed with respect to the timing and consequences.

To be clear, the licensee was legally, if not morally, entitled to do what he did.

Has this happened in the Australian financial planning industry before? No. Are there any precedents for dealing with more than 400 advisers and an estimated 15,000 clients left without AFSL coverage and its consequent regulatory safeguards? No.

That is why one of the outcomes of the current Royal Commission and, indeed, the evolving Financial Adviser Standards and Ethics Authority (FASEA) regime must be a change in the licensing regime to ensure that it is financial planners who not only figuratively “own” the relationship with their client but also “own” that relationship from a legal/regulatory perspective.

This can be achieved by taking the Australian financial planning industry further down the road to professionalism, by adopting some of the learnings from the regime which has evolved in the United Kingdom and by looking at the arrangements which prevail in other professions in Australia, specifically lawyers and doctors.

The bottom line is that doctors and lawyers are professionally qualified and licensed to “own” the relationship with their clients/patients such that were the law firm or medical practice in which they operate to close, they could continue to service their clients/patients elsewhere. The situation should be no different for financial advisers.

At the time of writing, the Financial Planning Association (FPA), the Association of Financial Advisers (AFA) and others were attempting to find a way forward for the Dover financial advisers and their clients who have found themselves in limbo in circumstances where ASIC’s ability to help was clearly limited by the nature of the licensing regime it oversees.

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Perhaps ASIC also need to take more responsibility and look closer at the way they handle things, so that it isn't the blind witch hunt or 'McCarthyism' like the 1950 US purge where innuendo and accusations were enough without evidence to destroy people's lives, careers, businesses and families.

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Forming one Association for oversight,training and PI would also reduce costs for individually licenced financial advisers

Where did you get the information from that ASIC was unaware of Dover's decision to close the licensee? Sources say that ASIC dictated orders to Dover to close down their license. Even the terms of the suspension and subsequent closure were dictated.

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