Historic hints from Australia?
It’s hard to avoid the news from the Hayne Enquiry in Melbourne and the drama played out on the live webcast makes for better viewing than most programmes on mainstream TV channels.
Not a very high bar, I grant you, but with one witness collapsing under questioning and critical issues being brought forth daily, the scriptwriters would be hard-pressed to match the interest level created.
Ms Rowena Orr, QC is undoubtedly one of the stars of the show and has left no-one out of her withering summations and pointed questions. You might hear the harrumphing and outraged spluttering of the mandarins in the VIOs, ASIC, and several other players in the industry that are/were enabled by what we believed to be a robust, thorough, and effective Australian regulatory regime.
It seems that the effectiveness of a regulatory regime can be tested by external review and investigation. It’s one thing for the stakeholders to declare nothing to see – it’s another for an independent party to conduct credible and unbiased research to establish the reality of those claims.
After all, the worldwide trend is for Authorities everywhere to promote transparency and integrity in financial services – what better way to promote this concept than to lead by example?
But back to the Australian drama – the outpourings from pundits, journos, and commentators have been flooding the online media with cries of anguish, outrage, and frustration.
Among the myriad views being expressed, a couple caught my eye as being potentially significant for NZ.
Firstly, the Australian VIOs may be forced to become VDOs – Vertically Disintegrated Organisations. This would be challenging but not surprising as ongoing calls for the separation of product manufacturing from financial advice grow stronger
The case may be less convincing in NZ.
I can envisage a Glass-Steagall type regulation in Oz with a less draconian version being contemplated here. There certainly needs to be more clarity and transparency around organisations that both manufacture and distribute products.
Secondly, there is a growing clamour in Australia for an individual licensing model to be introduced as the entity licensing model continues to fail under close scrutiny. The sudden closure of Dover, one of the licensed entities under review by ASIC and the Commission of Enquiry has thrown 400 advisers out of business until they can locate another licensee to entertain their application.
Whilst I don’t envisage anything as dramatic occurring in NZ, the individual licensing model. has always been attractive. Indeed, we were embarking on that pathway in 2008, before the institutions at the Big End of Town won their QFE model concession from the then Minister of Commerce of the day.
Had we been able to continue with the original model, the duality, ambiguity, and complexity facing us today would likely be considerably reduced
No point in reflecting on missed opportunities but as Santyana opined –
“Those who cannot remember the past are condemned to repeat it.”
There have been many paraphrases of the original quote, but the relevance of the original should not be lost on NZ industry stakeholders who are able to look at the Australian historical experience and take steps to avoid the same structural errors.
It will be indeed ironic if the individual New Zealand AFA model ceases to exist to be replaced with an entity licensing structure at the same time as the Australian regime abandons the latter in favour of individual adviser licensing.