Adviser Competency – Self-Regulation or Government Intervention?

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Do you support the creation of a Government-led body to oversee adviser competency standards, education and professional conduct?
  • No (76%)
  • Yes (21%)
  • Not sure (3%)

Out latest poll asks whether you support calls for the financial advice sector to cede regulation of its competency and conduct to the Government.

Stating the case for the creation of a new Government-run standards and competency unit, the Financial Services Council (FSC) has argued that the advice sector has shown it can’t rely on self-regulation if it wants to raise professional advice standards (see: Advice Sector Can’t Self-Regulate…).

Since it made its call for Government intervention, the FSC’s position has been criticised variously by associations, industry funds, institutions and individual advisers (see also: Adversaries Oppose FSC... and Reforms Need Time to Settle…).

Here is a brief summary of some of the pros and cons that have been articulated in this debate so far:

The case supporting the creation of a Government-led Advice Competency Standards Board

  • The proposed board will rebuild consumer trust in financial advisers following a difficult period of regulatory arguments and advice scandals
  • Perception – the consumer will trust the Government to better determine adviser education, competency and professional conduct standards, rather than continue to rely on the advice sector itself to do so
  • A single, over-arching set of standards covering adviser education, competency and conduct is preferable to different sets of codes generated by individual adviser associations, ASIC, institutions or a combination
  • Self-regulation has failed to deliver results. A Government-led initiative stands a better chance of actually achieving a universal set of standards that will apply across the entire advice community.

The case against Government intervention in setting adviser competency standards:

  • More red tape, following a drawn-out, four-year debate on the Future of Financial Advice reforms – a debate which is still continuing
  • Other professional advice sectors have proven self-regulation works (eg: the accounting and legal professions)
  • The Government should not meddle in areas that it does not properly understand, which has historically resulted in the creation of unintended consequences, the fall-out from which must be mopped up by even more regulation and red tape
  • Government intervention and control will not stop ‘bad apples’ delivering inappropriate advice. Rather, what is required is full and transparent change, which can be best delivered via self-regulation; that is, by those who live and breathe the industry every day.

This is an important debate for the industry and we seek your views. As always we will report your verdict next week, as you consider both the pros and cons of this question…

 



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2 COMMENTS

  1. “Self-regulation has failed to deliver results”…Are they referring to the millions (20% of Australians) who have sought advice? Or those that suffered from the rogues that ruin it for everyone? The FSC should look at the real common denominator in the industry…and that is that 99% of advisers actually try to do the best for their clients.
    Zealots and government regulations should never go hand in hand, it kills any real growth potential and actually harms the consumer by making the advice process more cumbersome.

    “the consumer will trust the Government”…that is so laughable, I am not even going to comment.

  2. What no one really address’s is the unbearable cost and significant risk that comes with giving advice. Advisers focus on conflicted advice models and asset based fees because just saying “yes thats a good idea” can see them in jail!

    If the government really wants to “fix” advice reduce the ridiculous level of compliance. A client asked me if she should rollover the $5k she had in Australian super to her employer fund, a quick look at the statements showed she had no insurance in the fund and her employer fund was cheaper. I had to politely remind her that giving her an answer was advice and I’d have to include it in a 78+ page document filled with rubbish that she would never read and I or a paraplanner would take a day to make.
    There has to be a half way point here, if I make money from the product, yes there should be suitable disclosure and documentation.. if it’s an obvious, simple (for an adviser) and easy piece of advice and I’m charging by the hour not by the FUA then a simple email with instructions and an invoice should be all I need to do. It will take me less hours and therefore cost them much less which means I can help more people.

    You simply don’t need a degree to help someone consolidate their super, take out some insurance and manage their budget and it just should not cost the average punter thousands of dollars get that basic advice.

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