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Could dealer groups become regulators?

Handing some regulatory responsibilities to dealer groups would help to streamline processes, says Camelot Group’s Peter Cave.

Monday, June 10th 2013, 7:34AM 5 Comments

by Susan Edmunds

It has been suggested that the Financial Markets Authority’s expanding remit could lead it to delegate some monitoring duties to dealer groups in the same way it deals with QFEs.

Cave said he planned to talk to Code Committee for Authorised Financial Advisers chair David Ireland about the idea.

“There’s a missing link in the current structure.”

He said Camelot had looked at the idea of becoming a QFE when the regulation first took effect.

But it would have meant being held to the same standards as big organisations such as AMP and ANZ, he said. “Was it really a track we wanted to go down?”

But he said there was value in the idea of a solution for smaller groups, such as Camelot, which has 33 adviser members.

Managing infrastructure for those advisers as individual AFAs was much more work-intensive than providing compliant systems for the Camelot advisers as a group, he said.

Six or seven Camelot advisers had been audited by the FMA, he said. If the group were operating in QFE-style, the systems would only have to be checked once.

“It would be good to be able to say ‘this is the Camelot process’.”

Loan Market chief executive David Hart said he had not heard the idea but would be open to discussing the possibility.

But consultant David Whyte said the suggestion was outrageous.

“I can’t see [FMA chief executive] Sean Hughes being comfortable delegating responsibility of that nature.”

He said dealer groups were little more than aggregators these days. “They are in no way in loco parentis of the regulator… it would be a dangerous path to go down.”

Britain’s attempts at professional bodies charged with monitoring had been a failure, he said.

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Comments from our readers

On 10 June 2013 at 9:57 am Concerned Stakeholder said:
I am surprised it's taken so long for someone to suggest this. However, based on my own experience with dealer groups/ corporate models then I'd have to agree with David Whyte. The likes of these groups,and there are many, do not have the strength of Governance and Independent Board influences required. FMA have, in the past, given some credence to the idea when selecting which AFAs to monitor ie AFAs who are part of a Corporate Group Model with internal compliance have been looked at as lower risk than those that don't. They also take into consideration from a risk perspective those that have external annual compliance checks performed by independent consultants. If a group like Camelot has good internal compliance processes that are audited bu an independent source then they would be considered even lower risk. Good luck Peter I think you'll need it. By the way Peter don't forget to watch the bottom line effect that being a QFE could have on the organisation. I'd like to see the calculations you've done to establish that its more cost effective. Also being part of a QFE does not mean your AFAs won't be individually audited.
On 11 June 2013 at 8:19 am Fred said:
A brilliant idea. Exempting dealer groups - like NorthPlan, Money Managers and Perpetual Asset Mgmt - would free-up the FMA to concentrate where it really hardly matters at all.
On 13 June 2013 at 2:04 pm Peter Cave said:
For clarification, Camelot is not a dealer group but a corporate entity with all Advisers operating under an employer/employee relationship. The comments forwarded were specific to the Camelot business where the advice process is mandated by Camelot as the corporate, not dealer groups in general, which may not enjoy the same contractual relationship with their Advisers.
On 14 June 2013 at 9:36 am Wazza said:
I had for some time assumed David Whyte to have a considered opinion, however to state that he believes producer groups to be nothing more than aggregators these days demonstrates how uninformed he is on some matters and perhaps should take a closer look at their strengths before attempting to minimise their effectiveness and significant part they take in our industry.
On 14 June 2013 at 10:05 am Andy said:
Concerned Shareholder - I pushed for this when the AFA/RFA/QFE debate was being fought in 2010, but I was poo-pooed, and told the cost would be prohibitive. The bigger the group the higher the levy and the higher the compliance costs.

Good luck to you Peter. I hope you manage to beat the red-tape brigade!

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