Institute of Financial Advisers president Nigel Tate suggested last week that experienced advisers could save money and pick up skills by doing audits for each other when they are due every two years.

The guidelines allow an independent person to perform an audit and say that reciprocal audit arrangements with a similar company should be considered.

Tate said some compliance companies were charging up to $2000 for an audit, and said it was “compliance for compliance’s sake”. He said there had been a proliferation of companies that were making money out of adviser regulation.

But Gavin Austin, of ABC Compliance, said most audits of independent financial advisers could be done for just under $1000.

“If you look at what’s involved, to say that a senior practitioner would do that for a few hundred dollars, it’s never going to happen.”

He said it was not only the time of the audit, which would take about three hours, but the work that would have to be done on keeping up with the requirements.

“You’re better to spend time in your practice, seeing clients and building up the business, that’s where you make a heck of a lot more profit.”

He said it made sense to call in specialists because there were consequences to getting it wrong. “Would you have your GP perform brain surgery?”

Austin said there was strong demand from advisers for external compliance advice.   “I wouldn’t be in business if advisers weren’t prepared to pay $900 to $1200 a year for compliance.”

The new DIMS rules would drive that further, he said.

He had been contacted by a number of small firms that wanted advice on navigating the new DIMS rules, and to find out whether they would be able to continue to operate as they were.

The FMA needed to take the lead to explain to the industry how it might get around things such as HR requirements and the need for an investment committee, he said. Austin suggested some smaller advisers might opt to say a research firm such as Morningstar was fulfilling the requirement for an investment committee – but that would require them to stick rigidly to Morningstar’s approach.

“Someone needs to sit down and see what it’s like to go through the process, no one wants to be the first. They need to explain how it will work for small advisers, not just the big end of town.”

He said the class DIMS requirements were very similar to the rules that institutions had to meet to be licensed as QFEs.