September 28, 2017
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.