ASIC has eye on Australian financial advisers sending jobs offshore

Big business has long embraced sending jobs overseas but another, much smaller segment of the market is following the trend – and regulators are watching.

The Philippines is a common location for offshored advisers. Picture: iStock

Big business has long embraced sending jobs offshore but another, much smaller segment of the market is following the trend – and regulators are watching.

The Australian Securities & Investments Commission in recent weeks released its corporate plan, or “hit list”, for the coming year, outlining where it would target its attention. Among key activities is a focus on technology, cyber and data-related risks, including the use of offshoring and outsourcing by financial advisers.

For clients of the 15,000-odd advisers operating in Australia, mention of offshoring may come as a surprise; it’s not typically advertised yet it’s more commonplace than you’d think.

“There’d be a fair bit of it going on in the industry, I’d say it is pretty common. Certainly firms of any size are looking at the cost of adviser functions (and how to reduce those costs),” says Sarah Abood, chief executive of the Financial Advice Association Australia.

“There’s different kinds of functions that advisers are offshoring; admin and paraplanning are the ones most commonly offshored right now,” she adds.

A lot of it is to do with costs: “The wages cost in The Philippines is probably about a third of that in Australia,” she says.

The Philippines is a common location for offshored advisers, The Weekend Australian understands, but offshoring has its complications and advisers not wanting to fall foul of legal requirements often outsource even this work to get a team set up overseas.

Local firm Vital Business Partners, founded in 2013, is the largest specialist operator helping Australian advisers set up teams in The Philippines. Essentially firms like VBP take the hassle out of overseas employment and look after the finer details to set up staff overseas to deal with admin work.

VBP chief executive Nathan Jacobsen has 1200 team members in three locations in The Philippines working for 250 Australian clients. These clients range from small, independent advisers to large advice businesses, and include ASX-listed companies.

The appeal of The Philippines is the highly educated workforce, he says. “We take care of a whole range of responsibilities … (so) advice firms can really just focus on what they do well, which is providing advice to consumers. They let go and allow us to take care of the administration needs.

“We take degree-qualified people in The Philippines; we then put them through an Australian accreditation process so they get Australian advice qualifications.

“Obviously they can’t give fin­ancial advice but they have the knowledge there and we also run ongoing development, including in partnership with a number of product providers. We do a lot of work to help the practice get the best value from team members.”

With around 6000 advice firms in the local market, there’s good prospects for growth for an outsourcing specialist, as advisers weigh up their options.

“The growth drivers have changed in time. The last few years was really all about the operational complexity from the (financial services) royal commission, as well as Covid and the inability to find local talent,” Jacobsen says.

“What’s really driving growth now is this emergence of the ­middle-tier advice market. As they’re conducting M&A activity and scaling and consolidating, that’s driving the need for variable capacity and resourcing they can’t get in Australia anymore.”

With outsourcing now well established within the industry, ASIC is ramping up its scrutiny of offshoring practices.

“We will review how investment managers and financial advisers manage the risks of using offshore service providers,” the regulator said last month.

“In particular, we will look at how they manage risks related to technology, data sharing and privacy. We will also publish resources that will help licensees improve the security of client data when sending it offshore.”

Glen Hare, co-founder of Sydney-based advisory Fox & Hare Wealth, has been outsourcing back office work to a team in The Philippines for several years. He sees the benefits and isn’t worried by the regulator taking a closer look. “We’ve been working with the team over there for more than five years. We did that through a third-party agency and … we go through that third party for the security aspect,” Hare says.

“The hardware that’s provided to the team is provided by that third party, the (employment) terms, the office space, it’s all provided by the third party,” he adds.

“To be frank, given the nature of our business, whether someone’s based in Tasmania, Queensland or Cebu (in The Philippines), it doesn’t matter.”

It makes sense that ASIC is reviewing offshoring practices, Abood says. “My sense is they’re just trying to get a handle on what’s happening – how common it is and the data protection elements, as well as what sort of functions are being offshored.”

ASIC is also looking at AI in a similar spirit, considering the potential emerging risks, including data security.

Advisers have also embraced AI but mainly for note-taking at this stage, according to Abood.

“ASIC is seeing if there are any risks, but data security is front of mind for advisers,” she says.

Originally published as ASIC has eye on Australian financial advisers sending jobs offshore