Advice firms have been building portfolios at institutional scale without institutional governance. The 2026 enforcement priorities, and Report 820, raise the question of how long that can hold.
On 13 November 2025, ASIC ASIC commenced civil penalty proceedings against Interprac Financial Planning over its oversight of advisers who put around 6,843 clients into the Shield and First Guardian master funds. Roughly $677 million flowed into two funds that have since collapsed. What should hold the attention of every dealer group principal and IC chair is one specific allegation. Interprac, ASIC alleges, did not have an adequate process for approving the products on its approved product list. It allegedly relied entirely on external research to put Shield and First Guardian on the menu.
Since those proceedings were filed, the Interprac matter has continued to expand. ASIC has sought to restrain Interprac from carrying on financial services, commenced separate proceedings to investigate a proposed sale of the licensee for $50,000, and secured a 10-year ban against one of the authorised representatives involved. Macquarie and Netwealth have agreed to remediate consumers for a combined $421 million. ASIC has described the Shield and First Guardian investigations as among the most complex and resource-intensive in its history, with nearly 50 staff across 26 connected matters. The governance questions the original filing raised have only sharpened.
Advice firms and dealer groups are running investment processes at a scale and complexity that look institutional from the client’s seat, but they have rarely been resourced to support institutional-grade governance. APL construction, manager research, portfolio construction, conflicts oversight, valuation scrutiny, liquidity testing: these are functions super funds run with dedicated teams, retained consultants, and ICs that meet monthly. A 50-adviser dealer group does not have that infrastructure. It has a managing director, a head of research if it is well-resourced, and an APL committee that meets quarterly when calendars permit.
ASIC has made clear the bar will not be set by what advice firms have historically been able to afford. REP 820, released on 5 November 2025, sets out what better practice looks like in private credit governance. The 2026 enforcement priorities, announced eight days later, place private credit practices in the top ten and explicitly flag advised distribution to retail clients for surveillance. The implication is not that advice firms need to become super funds. It is that the governance standards now being applied to the products they recommend, and the licensees who recommend them, require something closer to institutional process than most firms run. The question is who builds it.
REP 820 surveyed 28 private credit funds across retail and wholesale. The findings on the funds themselves have had most of the attention: opaque fee structures, valuations done by spreadsheet, inconsistent definitions of terms like “senior” and “investment grade,” liquidity frameworks that cannot survive contact with redemption pressure. The piece of the report with most relevance for advice firms is what ASIC said about distribution.
Sixteen of the retail private credit funds in the surveillance used the advised channel as a key distribution route. ASIC’s report named research houses as part of the chain and observed that their ratings can significantly influence advisers, platforms and investors. The regulator added that research houses are expected to undertake rigorous due diligence to substantiate any ratings they issue. The Interprac proceedings test what happens when a licensee leans on those ratings without doing independent work of its own.
The pattern matters because it generalises. Outsourcing manager selection to a research house is not the same as having an investment governance framework. A research house rating is a single input into a decision, not the decision itself. ASIC has separately commenced proceedings against SQM Research, alleging misleading reports in connection with Shield, further underscoring that research-house assessments are inputs to governance, not substitutes for it. ASIC’s view, set out in REP 820 and reinforced in the Interprac proceedings, is that licensees who place funds in front of retail clients carry their own assessment obligation. That obligation does not transfer to the research provider, the trustee, or the fund manager.
Super fund investment governance is not a mystery. The elements are visible in any APRA prudential standard or institutional governance review: a documented investment philosophy, a formal SAA framework with stated assumptions and review cadence, manager research that goes beyond ratings to include operational due diligence, an APL with explicit inclusion and exclusion criteria, an IC with independent voices and minuted decisions, formal conflicts management, and periodic stress testing of liquidity and valuation. None of this is conceptually difficult. It is, however, expensive to build and maintain.
A super fund with $50 billion under management can amortise a CIO, a head of manager research, an investment risk team and a retained asset consultant across the membership. The unit cost of governance per dollar of FUM is small. A 50-adviser dealer group with a few billion in funds across its book cannot replicate that structure on its own balance sheet. The principals know this. They have known it for years. The response, in most cases, has been to lean on the research houses for manager work, on the platforms for menu construction, and on the responsible entity for product oversight. REP 820 and the Interprac filing are the regulator’s response to that division of labour: it is not enough.
The Interprac filing is unusually direct on the point. ASIC alleges the licensee failed to have an adequate APL approval process, failed to respond appropriately to lead generators, failed to enforce a hold on new investments after its own managing director acknowledged serious issues with the funds, and permitted a “negative consent” practice that put client money into Shield and First Guardian without express agreement. Each of those failures has a corresponding institutional governance practice that would have caught the problem. APL committees should not approve funds only based on a research rating. ICs do not let new money flow into a product the responsible manager has flagged. Conflicts registers capture marketing payments from product issuers to advice businesses.
The honest answer to why advice firms have not built institutional-grade investment governance is that the economics do not work at firm level. Assured Support, a specialist AFSL compliance consultancy, estimates the real cost of operating a self-licensed advice business at $40,000 to $80,000 per adviser per year before practice overhead, with smaller licensees carrying a disproportionate share of fixed compliance costs. The result is the structure ASIC has just described: licensees relying on external research, APL processes that are administrative rather than investigative, ICs that ratify rather than challenge.
The institutional answer to capacity constraint has typically been the asset consultant. Super funds and endowments do not pretend to build their entire investment apparatus in-house. They retain Frontier, JANA, WTW or a similar firm for manager research, SAA modelling, portfolio construction support, and a second pair of eyes on material decisions. The consultant brings scale and specialisation. The fund retains the decisions and the accountability. The model is the reason institutional investors meet the kind of governance standard ASIC is now extending into the retail and wholesale fund distribution chain.
Until recently, asset consultants served institutional investors almost exclusively. Growing advice firms were left to do the work themselves, not because the consulting model does not translate, but because the industry had not built service offerings priced for a 50-adviser firm. The gap between what super funds can buy and what an advice firm can buy is the gap ASIC has now identified, even if not in those words.
Three things follow. First, documentation: ICs and APL committees should be able to show, in minuted form, the basis on which each product on the menu was approved. A research house rating is not a basis on its own. The record should show what alternatives were considered, the conflicts position, the liquidity profile under stress, and who monitors the fund on an ongoing basis. Critically, this documentation needs to demonstrate a consistent pattern of diligence over years, not months. The firms that will be in the strongest position are those whose records show disciplined, repeated process long before a question was asked.
Second, resourcing: an APL committee whose members have neither the training nor the time to interrogate a private credit fund’s NIM disclosure cannot be the only line of defence.
Third, structure: for most advice firms the answer is not an in-house investment team but an external partner providing manager research, portfolio construction, and governance overlay the firm cannot economically build itself. That is what super funds do. It is what the regulatory environment increasingly implies is necessary for any licensee placing complex products in front of retail clients. It is the part of the institutional playbook that, more than any other, most firms have not yet adopted. The gap is not in adviser competence. It is in the supply of institutional-grade governance services priced for the mid-market.
Sources:
James Tomkins is a Senior Asset Consultant at Vertex Investment Services, a specialist asset consulting partner for advice firms and licensees.
