Why you can't let regulation run your business

Deborah Kent doesn’t like to be blindsided.?

In her 35 years as an adviser, 26 of which have been spent as principal of Integra Financial Services , she’s always tried to anticipate what’s coming next – whether that’s a big piece of legislation, the new standard business model or the types of services clients will be looking for in the future. Her rationale is that if she can prepare for the changes ahead, she’ll be in a much better position when they arrive.?

“We’ve always had the view that regulation is always going to come around,” she explains, “so you might as well get ready for it. When I started in advice, it was easy – you’d talk to a client, put a document together and give them some advice. We’d disclose fees, but it was mostly commission-based investing back then. But I saw all the changes coming through: changes in super, changes in tax and then the Ripoll Inquiry, FoFA and so on. It’s a fact of life.”?

As an example, Kent notes that Integra went fee-for-service “close to the GFC,” several years before FoFA, subsequently, the Trowbridge Review’s crackdown on what was left of the commissions model. “We always want to stay on top of things like that,” she says. “We were happy to do it. After all, we didn’t have a lot of insurance – a bit, but it was never our prime focus.”?

A new standard

Kent also saw the necessity of an education and professional standards system for advice. Believing it to be an essential part of financial advice’s journey to professionalisation, she joined the FASEA board in 2017 and participated in the implementation of education requirements, the adviser exam and the Code of Ethics. At the time, she recognised that these changes would cause some consternation in parts of the industry, but believes that the long-term benefits outweigh the costs.?

“We all meet our qualifications under FASEA,” she says. “In fact, I had to do my graduate diploma. We did our exams. Anyone who says an older person can’t do it – well, I’m 64. It’s not easy but it can be done. I want to stay around in the business so I have to adhere to the rules – especially because I was on the board.”?

Kent recognises that FASEA became a catalyst for many advisers to “bring their retirement forward,” but thinks the hard times are coming to an end. “We will probably hit a dip of advisers for a couple of years,” she says, “but the very nature of the professional standards lends itself to bringing new people in.”?

This is because, she explains, advice will begin attracting the kinds of people who might not have otherwise considered it as a career. “In particular,” she says, “I think we’ll start seeing more women come into the profession. I’m a big advocate of that. It’s a good career and it works part-time, too.”?

Bringing more women to advice

In Kent’s experience, many women were historically put off by the association between advice and referral targets and “money-based KPIs.”?

“They didn’t want to deal with this idea of getting ‘x’ amount of referrals,” she says. “They just want to work with clients and give them a great outcome.”?

For this reason, Kent thinks the future of advice is promising – the professional standards, in addition requiring a certain level of educational rigour, change the narrative around what advice is and what it can do for people. “We now have all the hallmarks of being a great profession,” she says. “People can come into financial advice looking for a great, long-term career.”?

Of course, Kent’s perspective on the advice industry isn’t wholly positive. For one, she thinks fee consent rules have become increasingly onerous in recent years – for both the adviser and the client. “I have someone who works just on fee disclosure statements,” she says. “They could be working on other administrative issues, but this is all they have time to do.”?

Who looks after the mass market?

Perhaps even more pertinent, though, are Kent’s concerns regarding servicing the advice mass market – or, rather, why she can’t. “How can we service the other end of the market,” she says, “such as consumers who might want advice but can’t pay for the whole holistic offering? This is where legislation needs to look at how we deal with people who just want that simple, one-off advice piece. Yes, we consider their needs and objectives, but we offer it as simply as possible.”

One possible solution, floated in the Quality of Advice review proposals paper, is to allow certain providers such as super funds and banks to offer limited advice without all of the additional obligations that come with the kind of full-service offering that Integra provides. “It seems like the current thinking is to hand that end of the market back to the institutions,” Kent says. “Is that the right thing to do? I fear we could end up going back down the pathway of inappropriate advice if we did that.”?

In the interim, though, Kent is focused on capitalising on the promising future she sees for both her business and the profession in general. “There’s been a lot of extra work since the Royal Commission,” she says, “but those advisers who embrace the change and decide to continue will have great opportunities in front of them. We’re in a growth phase now and are actively looking for new clients.”?