Regulatory Burden Pushing Advice Out of Reach

The level of regulation that financial advisers are required to meet has added to the cost of advice which in turn is likely to be keeping consumers from seeking advice, according to the FPA.

The Association made the claim as part of its submission to the Productivity Commission Inquiry into Competition in the Australian financial system in which it also claimed that 30% of consumers who had not sought financial advice stated the high cost of advice as a key reason for their decision.

The submission stated the increase in the regulatory burden placed on advisers and licensees, particularly over the past five years, had increased the cost of advice and advisers were likely to face more costs in the future due to the cumulative nature of the Government’s cost recovery approach to regulation.

As part of this approach, advisers would be required to contribute financially to ASIC’s cost recovery processes, an Adviser Code monitoring scheme, funding the new Financial Advice Standards and Ethics Authority, paying for a financial advice entry exam and any new education requirements alongside their own existing business costs.

Advisers would also be subject to seven different regulators…each administering the regulatory requirements using different language

The submission stated the cumulative impact of these measures would include “…unavoidable increases in cost of advice for consumers” and “…restriction of trade and negative impact on the ability of small licensees to compete in the advice market”, as well as a “…reduction in the number of advisers as some businesses would not be able to employ new advisers…or may need to reduce adviser numbers”.

Advisers would also be subject to seven different regulators – ASIC, APRA, ATO, the new Financial Adviser Standards and Ethics Authority (FASEA), Tax Practitioners Board, Austrac, and Privacy Information Officers – each administering regulatory requirements using different language and imposing different compliance requirements on financial planners.

“In addition, the same piece of advice will have oversight and interpretation by the Courts, the new Australian Financial Complaints Authority (AFCA), Australian financial service licensees and professional bodies,” the submission stated.

It added this spread of regulators and bodies could cause an adviser to breach one regulation in order to meet the requirements of another, with the FPA recommending the creation of a central body to check laws and regulations are integrated prior to their introduction into parliament or being issued by a regulator.

“Even small differences in requirements, such as the need to provide different documentary evidence to different regulators for the same type of regulatory activity … significantly drives up process and compliance costs for businesses, ultimately impacting on the cost of providing advice to consumers and the sustainability and competitiveness of each business,” the submission stated.

  • Ken

    Now the FPA works it out ?? What were you doing over the past 3 years when this issue was starring you all in the face and you ran with the “hounds” on it

    • Squeaky_1

      It is what we are all saying all the time Ken . . . client best interest does not exist in the minds of the bureaucrats and life companies who are in league together making these changes for their own self interests. Politicians so they can be seen to be “doing something” (as ill-advised and harmful to clients as their actions are), life companies to get rid of advisers and not have to pay commissions on distribution (AKA 2 year clawback and current commission reductions looming). Yep, the FPA ‘appears’ to be seeing this now. You reckon they will go and change something now?

      • ken

        Last word on this from me as I am disgusted with it !
        How long before they increase their membership fees because of lack of members AFA have already done it. There must be some kind of impact on the FPA and AFA if memberships continue to drop as people leave the industry bemused by the apathy to what has been happening in front of these organisations eyes for the past 5 years and chose to do and say nothing about it and the deprimental effect it was going to have.
        Something’s got to give surely ??

        • Reality Check

          Ken, I don’t think the FPA or AFA are seeing it this way. Remember part of the “deal” was to get compulsory membership so as non-aligned advisers and risk advisers don’t have much of a future I believe the FPA and AFA think they will simply make up the membership from the banks. I also think they have completely underestimated the impact in the future of their actions. I can’t see both the FPA and AFA surviving either. They will either have to merge or fight it out for the small number of members that will be left and you can bet the banks will be negotiating better membership fees in the future once the competition has been wiped out. Bad days ahead for all.

  • Mark

    I’m a 26 year old Financial Adviser looking for a future in this industry. Any advice from established guys on if there is a future in this industry?

  • Mark

    Hi, im a 26 year old financial planner. I studied Business in Perth and had my heart set on Financial Planning. Any suggestions from you well established guys on whether there is a future in this industry or am i wasting my time?

    My firms revenues are 50% risk possibly higher. We are seeing adviser numbers dropping already and the proposed changes haven’t even come into effect yet. Thoughts?

    • Jokes

      Become a lawn mower man….