The unexpected closure of Dover Financial Advisers and the focus of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has many financial planners re-examining the quality and calibre of the licensee they’ve chosen to hitch their wagons to, and licensees scrambling to prove their worth.

For some advisers there’s a dawning realisation that a licensee’s insistence on compliance and monitoring is, after all, a good thing. On the other hand, there should be a sense of disquiet if a licensee’s monitoring and supervision is perceived to be lax.

Matrix Planning Solutions chief executive officer Todd Kardash says licensees often aren’t thanked for piling what advisers regard as an unreasonable compliance burden upon them.

The head of the CoreData Licensee of the Year for 2018 says advisers “don’t always appreciate why we ask them to do things a certain way, but they know that we are looking after their best interests and their clients’ best interests”.

“In light of the royal commission, advisers are increasingly sympathetic and grateful for the way we operate,” he says.

Kardash says discussion of the future role of the licensee entity is understandable, and while he declines to discuss Dover specifically he says that ultimately “the community needs reliable advice providers and that means licensees that can meet stringent criteria such as strong governance, minimum capital requirements and client-centred processes; plus regulators who can effectively regulate the sector including a licensee’s ability to provide quality services and compliance support”.

He says the focus on self-licensing as an option overlooks the fact that “many boutique licensees would find it challenging to meet strict criteria”.

“The uncomfortable truth is that larger institutional-based organisations are best placed to have the resources and capacity to fund the future needs of advisers and remediate clients, should they need remediation,” he says.

“The challenge for vertically-owned licensees will be addressing cultural issues and properly managing conflicts of interest. This is likely to be easier to achieve if they can be financially viable in a stand-alone sense in future.”

Kardash says technology is critical to how licensees support advisers and will only become even more important to how they ensure compliance and monitoring can be conducted efficiently and relatively painlessly.

He says Matrix’s approach to technology includes some things that seem obvious, like insisting that the licensee and all advisers operate on the same technology platform.

“If an adviser wants to join us and use another technology platform, we just don’t allow it to happen,” he says.

“There have been a number of licensees over the years where you could use anything. You could use Xplan, you could use Midwinter, you could use Coin, and you could come under the licence. Well, as a licensee I’m not sure how you could monitor and supervise in that case.”

But he says current technology solutions do not necessarily service advisers or clients as well as they could, and the “dominant duopolies in the market today” are ripe for disruption.

“I think there’s an Uber of the financial planning world out there, and they will come through and be a real disruptor,” he says.

“It should not take between five and six hours to produce an advice document. I just don’t see that’s an effective use of technology.

“If you can simplify that process to a point where it’s intuitive to pull together in a document, why does it take more than 40 minutes or half an hour? There’s some really big wins to be had.

I’ve looked at a lot of technology in the past two years, a lot of it, everything that’s out there. There’s no silver bullet but I think there will be some disruptors coming in the next 12 to 18 months.”

In that environment, the way licensees approach technology solutions to support advisers needs to be guided by principles-based rather than tied to a particular provider or solution.

Five tech tips for licensees
1. Build efficient customer relationship management systems;
2. Aim for a paperless office and client communication;
3. Integrate all advice, from robo to face-to-face, with needs analysis, modelling tools and statement of advice production;
4. Help advisers to compellingly demonstrate their value proposition; and
5. Aim for 100 per cent compliance oversight, harnessing artificial intelligence.

“Technology is changing so fast which is why we are continuously scouring the market for the latest solutions,” he says.

“There are some great client tools out there such as Moneysoft, which helps clients budget and track their cashflow, and Prospera which is an excellent tool for advisers to model financial strategies and compare scenarios year-on-year with monthly cash flow reporting.”

Kardash says.

He says that in the next couple of months Matrix will be unveiling a new offer for advisers, “but it’s under wraps, so I can’t say too much about it”.

“[Technology] will be part of it, but it’s not the sole driver,” he says.

The next couple of months will also provide signals for all licensees on how their relationship with advisers is likely to evolve, as the royal commission works through its program.

“Just take simple things, like grandfathered commission, take things like fee-for-no-service, appropriate advice, best interests duty,” Kardash says.

“We’re doing a lot of pre-thinking and pre-work around things like grandfathered commissions, things like offering a review and when you’re charging a fee for service. Did you do a review, or didn’t you do a review? [That] will be a key question that comes out of the royal commission.

“I think by September if an interim report comes out, I think we’re going to have a very good idea of how big a role we will play in supporting advisers though the next 12 months.”