Three industry groups have broadly welcomed the release last week of the FSC’s White Paper on Financial Advice.
Statements from the AFA, TAA and the FPA indicate the membership organisations’ generally see the FSC’s blueprint for a simplified regulatory framework as helping to build momentum for change (see: Simplify Advice Framework, Drive Down Costs.)
However one licensee group has said while it supports any moves to reduce the cost of advice and relieve the compliance burden as outlined in the FSC White Paper, it says trust is an issue.
The AFA’s General Manager, Policy and Professionalism, Phil Anderson, says the White Paper is an important contribution to the ongoing debate about the need to fix the financial advice regulatory regime.
He says the association also welcomes the KPMG report on the cost of financial advice, “…which highlights the current problem with financial advice being excessively expensive and the importance of finding solutions, including regulatory reforms to reduce this cost.”
Anderson says the White Paper includes a number of recommendations that should help to reduce the cost and time involved in the production of financial advice.
“We particularly welcome the recommendation on the removal of the safe harbour steps, the change of an SoA to a Letter of Advice, and the recommendation that financial advice be tax deductible,” he notes.
Anderson sees the FSC paper as an important input into Treasury’s 2022 Quality of Advice Review, “…which is a big opportunity to get to the core of the issues and to find solutions to address the problems.”
He adds that the White Paper is helping to build the momentum for change. “We look forward to working with all stakeholders to achieve change to make sure that financial advice can remain accessible and affordable…”
A step in the right direction
Meanwhile TAA believes the FSC blueprint for a simplified regulatory framework is a positive step in the right direction, and has the potential to deliver better outcomes for consumers and advisers.
TAA CEO, Neil Macdonald says the association is particularly pleased to see the FSC’s call for the separation of product and advice.
“This would represent a giant leap forward, as in practice it would mean only licensed financial advisers would be able to give financial advice.”
Macdonald adds that TAA is also pleased to see the call to distinguish between financial advice and general information noting that this would help consumers better understand when they are being given financial advice and when they are merely being supplied with general information by a product provider, for example.
…the regulatory reforms …may have increased consumer protections, but it has come at too high a price for consumers…
He states any legal and regulatory change must put the client front and centre and that the regulatory reforms “…that the industry has endured to date may have increased consumer protections, but it has come at too high a price for consumers.
“The cost of providing financial advice, the onerous review requirements and the application of black letter law in relation to fee disclosure statements has made the delivery of advice too unwieldy and far too expensive. We can, and we should, do better than this.”
Macdonald adds that he looks forward to future refinement of the blueprint.
“This current version is mainly focused on new clients, and not as much on the ongoing advice and services provided to existing clients …”
He also notes that the proposed timeline is very long, “…especially with the pent-up demand for advice now, and the inter-generational wealth transfer that will start to accelerate over the next nine years.”
However, he adds that the blueprint is a sign that “..we are moving in the right direction. While there is certainly more work to do, with genuine collaboration, and a focus on client and consumer outcomes, we are confident that the financial advice industry has a brighter future.”
Closely aligned
Dante De Gori, CEO of the FPA, says his organisation broadly welcomes the release of the FSC’s white paper and its goal to reduce the cost of providing financial advice, allowing financial planners to spend more time with new and existing clients.
He says the white paper closely aligns with the FPA’s five-year policy-platform roadmap – Affordable advice, sustainable profession, introduced in June 2020.
He says the FPA policy platform “…has the ultimate aim of reducing red tape and the duplication of regulation in the financial planning profession.”
He thanked the FSC for engaging with the FPA through its Green Paper process and “…picking up many of the same themes and recommendations that the FPA made 18 months ago.
“Further, we commend the FSC on listening to the concerns of the FPA in relation to a number of their proposals which would have added substantial cost and complexity to the delivery of affordable advice to Australian consumers.”
De Gori says the release of the white paper demonstrates the FSC’s commitment to joining with the FPA in the discussion of how to put advice delivery back in the hands of professional financial planners and in the reach of all Australian consumers.
…The profession will now benefit from a stronger and unified representative voice…
“The financial planning profession will now benefit from a stronger and unified representative voice on the issues most critical to them.”
The statement adds that with the Government’s intention to introduce a single set of standards for the financial planning profession, “…we believe now is also the time to prioritise the establishment of a principles-based professional and ethical advice model, as opposed to the current ‘tick-a-box’ rules based approach to compliance under the existing regulatory framework.”
De Gori says that with these measures in place, “…the next crucial step to get right, and ensure the success of the proposed single disciplinary model and a principles-based professional advice model, is to create a true professional registration model, which is a key recommendation from the FPA’s Policy Platform.”
Well if AFA & FPA are on board with the FSC, that tells me it won’t do anything for advisers or their clients. No conflict of interest in the FSC is there?
No-one likes red tape and a maze of Regulation that can entrap Licensees and Advisers.
However, by moving to a principles based model where all the complex Best Interest Duties Regulations are still there in the background, where does this leave Advisers?
Is it better to reduce the time and cost to provide advice, only to increase the risk to Licensees and Advisers, which could have devastating impacts at a complaints hearing?
It would appear that litigation Lawyers would love this scenario, as it enables them to question “Interpretation” of the Regulations in a Court, of which, usually the only winners are the Lawyers.
What every Australian wants is clarity and a Business model that will enable the cost of Advice to reduce and the threat of misunderstood Regulation, not being used to destroy peoples lives.
I have been pushing for a separation of Risk and Investment Advice for more years than anyone else in the Industry and my views and arguments still hold true today.
It is self defeating to hold onto a viewpoint if that Industry, being the Life Insurance sector, is collapsing due to an intransigent ideology.
What the Government, the Regulators and the numerous Lobby groups still do not seem to understand, is that Life Insurance advice is completely different to Investment advice and Holistic Advisers are scoping out Life Insurance advice, simply because it is too hard and too expensive to provide.
If the Government is serious about Australians having the opportunity to attain advice around their Life and Disability needs, then it needs to be made attainable for Advice practices to provide it.
The current framework is still too hard and unless the elephant in the room, which is “risk”, is not also addressed, then there will continue to be declines.
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