A new report from the FSC has concluded Australia’s financial advice licensing framework requires more proactive regulatory supervision to ensure it continues to protect consumers.
Its white paper – The Future of Advice Licensing – includes 19 recommendations to Government including:
- Introducing a universal minimum standard of ASIC supervision, including annual licence renewals and biannual supervisory engagement with every advice licensee
- Establishing a dedicated risk-based supervision program for higher-risk licensees, supported by enhanced regulatory intelligence; and
- Redesigning the ASIC financial advice levy to fund the recommended supervisory uplift, increasing it to a minimum of $25,000 while proportionately reducing the per-adviser fee
The FSC said the proposals would better align regulatory costs with where risk is managed, arguing that continued increases in per-adviser levies are not a sustainable way to fund supervision.
The report follows industry consultation on the FSC’s Green Paper, released in July last year, which examined whether the advice licensing framework remains fit for purpose in a significantly changed advice market.
See: FSC Highlights Need to Reform Licensing Framework
The consultation, said FSC CEO Blake Briggs found “broad support” for retaining the existing AFSL architecture, recognising that it provides a clear and effective accountability model under which licensees remain responsible for the financial services provided under their licence.
Rather than replacing the current licensing structure, Briggs said the focus needs to be on modernising ASIC’s supervision of advice licensees, enhancing:
- Transparency and improving regulatory intelligence, and
- Supporting earlier intervention where risks emerge
Briggs said: “From a range of stakeholders, the FSC heard that the Shield and First Guardian collapses exposed vulnerabilities in the system which the early identification of risk could have prevented.
…ASIC must be equipped with the information, resources and supervisory capability to identify and address risks…
“These proposals represent a positive step towards strengthening the supervisory framework to identify and reduce those risks.
“The AFSL framework places responsibility on licensees to supervise advisers, manage risk and protect consumers. The challenge is ensuring those responsibilities are continually met, which can be tested through supervisory oversight, rather than assumed after a licence is granted.”
Briggs said the solution is not new laws, “but more effective administration and supervision of the existing licensing framework” so licensees are more rigorously held to account in fulfilling their statutory duties to consumers.
“ASIC must be equipped with the information, resources and supervisory capability to identify and address risks before consumers suffer harm,” he said.
The FSC does not represent financial advice, or financial advisers…
FAAA CEO Sarah Abood said it will be reviewing the FSC’s proposals carefully.
“However, we expect the proposals will not be well received by smaller advice licensees who would be hit hard by increased regulatory intervention and ASIC costs under the proposals,” she said.
“It’s important to be aware of the context of these recommendations. The FSC does not represent financial advice, or financial advisers. It represents the interests of five large advice licensees, with the vast majority of its membership being made up of large product issuers such as managed investment schemes. Its proposals should be considered in this light.”
