Impact of Royal Commission under the spotlight

Thursday 30th August 2018 Greg Bright, Investor Strategy News

Ian Knox

The IFA market is likely to emerge as the victor as the Royal Commission into banking and superannuation has highlighted the problems with a vertically integrated financial services model and institutional ownership of the advice chain.

According to Ian Knox (pictured), a new director of Lonsec Holdings, the Royal Commission has thrown up issues for the banks and other institutions that are deep rooted. He said: “The issues were related to managerial behaviour rather than advice, per se, and this is an issue which is best resolved through boards and senior management, not by the regulator or government.”

Knox is one of the speakers at the SuperRatings and Lonsec ‘Day of Confrontation’ conference in Melbourne on October 30. He will be joined in a session which looks at the future of the financial planning profession by Tom Reddacliff, the chief executive of Encore Advice Group.

The co-founder of Paragem, now a subsidiary of HUB24, and a former chief executive of St George Bank’s Sealcorp, the Asgard platform owner and dealer group, Knox said, however, it was presently unclear what the Commission’s recommendations would be for the industry funds’ advice arms.

“The expectation was that there may be problems with personal financial advice positing under limited or intra-fund advice,” he said. “But it’s now time for both groups [industry and commercial funds]to meet together and produce a common outcome and make advice affordable for everyday Australians. The regulatory environment and rigid intervention make this difficult. It’s reached an inoperable level and is making advice unaffordable to those who need it most.”

He said that the CPAs had “failed abysmally” to enter the financial planning space, which demonstrated some of the challenges in providing personal advice. With respect to the possibilities with ‘robo’ or digitally provided advice, he said this was an evolutionary trend but one where Australia struggled because of lack of scale.

“The first adaptation was really just simplified ETF investing and then industry funds went to the next stage, with the likes of Decimal, and now we’re entering the really challenging phase of trying to digitally deliver personal advice. But if you took the Corporations Act requirements on planners’ rules the end result would be a 72-page robo document. So, it’s a bit meaningless.”

Knox’s co-founder of Paragem, Charlie Haynes, has become the chief executive of Lonsec Holdings. The company’s two main divisions are SuperRatings and Lonsec Research. The firm also recently launched Lonsec Investment Solutions which enables implementation of its research through the managed account space. This is an area well known to the pair who sold Paragem to the listed managed account operator. Knox remains the non-executive chair of Paragem.


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