Training provider Strategi said, under the new financial advice rules, it would become even more important, because businesses would be responsible for the conduct of their advisers.
Unlike the current situation, where each AFA is authorised individually, under the Financial Services Legislation Amendment Bill, those advisers will all have to work for a licensed financial advice provider.
“Businesses that don’t have a robust selection and on-boarding process when recruiting advisers have the potential to expose not only clients to financial risk, but also to threaten the business with unnecessary and possibly substantial financial, regulatory and reputational risks,” Strategi said.
Barry Read, whose firm IDS is merging with Strategi, said it was an area that advice businesses struggled with.
He said all licensed entities would need to be able to explain to the regulator their process for recruiting under the new advice rules – and just putting an ad online and hoping for the best would not be sufficient.
“You invest so much money bringing people on, if you’re going to spend that money and effort you want the right outcome. It can take a couple of years before you see a return on your investment. Putting processes around it to improve the outcome and chance of success makes a lot of sense.”
He said the right process and approach would be business specific and adviser specific and would vary according to what the business was looking to achieve.
Those hiring people who would become nominated representatives would need to look for people with good people skills who could follow systems and processes closely.
Those who wanted financial advisers or potential successors would need to look for someone who was a good advice-style match and had an entrepreneurial spirit.
Nick Stewart, of advice firm Stewart Group, said his firm found it better to train people from scratch.
Hiring risk advisers was difficult because there were not yet any regulations for new entrants to meet, he said. “The bar to entry is so low and our bar is so high with compliance and systems and associated costs.”
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