According to CountPlus, a number of licensees are offering fees that are cheaper than those offered by Dover Financial Advisers, potentially putting advisers at risk.
Talk to Money managementCountPlus Managing Director Matthew Rowe said there were a lot of licensees offering very cheap licensing solutions and there was a potential lack of understanding of their actual oversight obligations and monitoring.
âOn one end we have more engineering – more legalistic interpretation of compliance – and on the other end the licensees who have really cheap offerings that are outsourcing compliance, and there is probably regulatory arbitrage there. They probably don’t meet the requirements as a license holder and potentially put advisers at risk, âRowe said.
âWe know that there are currently licensees who have lower fees than those in Dover. We do not believe that it is a sustainable offer and not in the interest of advisers to go down this path and not in the interest of consumers.
Rowe said that with the work that remains to be done with the Compensation of Last Resort (CSLR) scheme, he could potentially see a capital requirement to mitigate moral hazard within the CSLR.
He said a business with no capital that went into administration or liquidation would then have consumers suffering from CLSR and the rest of the industry would have to pay for people who did not act in good faith.
“I think if there is potentially a capital requirement to mitigate moral hazard, it is a government decision,” he said.
âI think that licensees should have an obligation to demonstrate that they have capital in case of bad behavior and to support themselves and not rely on professional liability insurance, and licensees need to the skin in the game to support advisers and consumers so that if something goes wrong they support the advice and don’t just put the entities into liquidation and the consumer loses the bottom line.
âIf that happens, it could change the landscape for licensees. “