The cost to a platform of getting an advice relationship wrong has risen sharply. That changes how closely they look at the firms operating through them, and what they do when something does not add up.
In June, ASIC published a review of how six platform trustees monitor risks to member savings. It found one advice licensee, which ASIC describes as harmful, that had been onboarded by four of the six. It charged more than $1.6 million in advice fees, targeting members with low balances. Each of the four onboarding histories exposed something different. At one platform, two earlier applications had failed before the problems were resolved and the licensee was let in. At another, a licensee that had previously been removed under an adverse risk rating came back under a different name, and nobody connected the two.
Two months later, the Government announced reforms that materially increase what can happen when trustee oversight fails. Maximum penalties for core breaches of trustee obligations would rise to roughly $18 million, up from around $870,000. ASIC would be able to order a trustee to run a remediation programme where an investment option fails and there is reason to suspect the trustee breached its obligations. APRA would gain power to require trustees to hold capital against higher-risk options on their menus. None of it has been legislated yet.
Nor is any of it aimed at advice firms. It lands on the platform. But a business facing that much downside for a relationship that goes wrong will look much harder at who it is doing business with, and it will not wait for a regulator to make it do so.
The cost a problematic advice firm imposes on a trustee is not capital. It is attention, and attention has just become considerably more expensive to withhold.
The core finding of ASIC’s review was that trustees have not done enough to understand the business models of the advice licensees operating on their platforms. That is now being fixed from several directions at once. An industry standard covering platform trustee oversight of advisers took effect in July, with full compliance required from January 2027. APRA is consulting on investment governance reforms this month. It has already acted against five platform trustees, every one over how they govern what sits on their menus.
APRA has been unusually direct about where the difficulty comes from. Its corporate plan says the reforms will fall hardest on platform trustees because their menus are broader, their products are more complex, and advisers play a larger role in choosing and recommending what members end up in. That is the prudential regulator naming adviser behaviour as one of the reasons these platforms are harder to supervise than an ordinary super fund.
The commercial logic from there is not complicated. Monitoring costs money and investigating an unusual pattern costs more, so a firm that repeatedly generates questions consumes review capacity a trustee could spend elsewhere. It does so at a moment when the consequences of getting something seriously wrong have increased dramatically.
At onboarding, expect verification of the basics, then questions about the shape of the business: where your clients come from and what referral arrangements sit behind them, what advice you provide and how you deliver it, what your fees look like, and what supervision sits over your advisers.
After that, the assessment runs on patterns: a high volume of new accounts or rollovers from one adviser, advice fees that look large against a member’s balance, or groups of clients from the same adviser sitting in the same illiquid option. Where something does not look right the trustee can ask for more information or for advice files, and if a firm does not respond properly it can suspend fee deductions, restrict new business, limit adviser access or remove advisers from member accounts altogether.
Those are the formal steps, and the more likely outcome is quieter: more questions, slower onboarding of new advisers, and less appetite to grow the relationship. A firm that keeps producing signals it cannot readily explain becomes an expensive one to keep, and that judgement does not need to wait for a breach.
It is worth being clear about the boundary, because some of the commentary has overstated it. The platform is not becoming a second investment committee. ASIC has said it does not expect trustees to judge the quality or appropriateness of individual advice, and the industry standard is explicit that trustees should not try to replicate the supervision a licensee already owes its own advisers. Nobody at the platform is going to grade your manager selection process.
What they can do is read the footprint your investment decisions leave in their data and form a view from it. In some ways that is the harder test. You do not get to explain your philosophy. You get to explain a pattern.
When we take over a suite of portfolios, the gap we most often find is not in the philosophy. It is between what the firm believes its clients hold and what they actually hold. That gap is invisible internally. It is not invisible to a platform looking at flows and concentrations.
Moving a book, shifting clients into a managed account, or making a material change across your models can each produce the kind of account, rollover and flow activity these systems are built to notice. None of that is misconduct and all of it is ordinary work, but it may still generate a question, and that question may arrive well after the decision, when the reasoning is no longer fresh in anyone’s mind.
The best answer is a record made at the time: what was decided, who signed off, what was considered, and how client impacts were weighed. Not a memo written the week the platform calls. A record that already existed because the investment function produces one as a matter of course.
We wrote earlier this year about the governance gap ASIC was preparing to test, and the argument then was that a documented, owned investment process separates a firm that can defend its decisions from one that cannot. That argument now has a commercial edge on it. The party forming a view about your business is no longer only the regulator. It is the platform you run on. It now has stronger reasons to care, and the firms that can answer its questions from a record they already keep will be cheaper to carry than the ones that cannot.
Joe Akiki is Managing Director at Vertex Investment Services, a specialist asset consulting partner for advice firms and licensees.
