Speaking in a recent podcast on the Quality of Advice Reform, CPA Australia senior manager, advocacy and retirement policy Michael Davison said the core focus of the Quality of Advice Review needs to be consumer-centric.
“We’ve seen a raft of regulations over the years, we have regulation upon regulation, we’ve reformed reforms, it’s all about putting more regulation and rules in place, and it’s now at the point where it’s choking the industry,” said Mr Davison.
“We need to go back to the start and look at how it actually impacts on consumers. We need to look at what consumers need and what they want, and how do we engage with the consumer.”
Speaking in the same podcast, SMSF Association policy manager Tracey Scotchbrook also agreed that the layers of complexity in the regulations are a big pain point.
“Other issues flow from the fact that the FASEA reforms and the way the legislation is structured is really focused on someone who’s a comprehensive or a full-service financial adviser. There’s no real contemplation of the different types of advice services and advisers that are out there in the marketplace,” she said.
“[The Quality of Advice Review] is a really great opportunity to drill down into this and get these different advice services clearly defined and how advice can be delivered and really closely examined so that we can get that consumer-centric, cost-effective, functional model in place.”
BT head of financial literacy and advocacy Bryan Ashenden said he hopes the review takes a holistic approach and focuses on simplifying the requirements.
“How do we have a system in place that says if I’ve got a client that only needs single topic advice, relatively simple advice, we can deliver that in an easy manner, and you can actually see that there’s a big difference in terms of the amount of time that is required and the amount of effort that is required to produce that piece of advice compared to something which is much more comprehensive,” said Mr Ashenden.
“I think that’s where we see some of the struggles today, whether it’s a simple piece of advice or a more complex piece of advice, the time difference is not dramatically different, so it can take a long time to get that simple piece of advice because of the various regulatory obligations and regulatory hurdles.”
Mr Ashenden said it is very important that licensees and regulators are also comfortable with taking a different approach where not everything is disclosed to the client.
“I think that’s ultimately what we want to see, not just ‘well that sounds good if you do it this way’. Let’s all get behind it and make sure that it can actually be delivered on. That’s going to be the sign of success,” he said.
Chartered Accountants Australia and New Zealand financial advice leader Bronny Speed said it is impossible for consumers to understand all the current regulatory framework when so many different rules apply depending on the advice provided.
“Let’s get onto a level laying field, let’s work in an industry where we are individual professionals responsible for our own activities and our own compliance, our own CPD, our own quality of advice,” said Ms Speed.
“I think this will enable us to come up with a blank piece of paper that says ‘righto, consumer first’. How do we all as differing professionals within an industry provide advice that’s appropriate to a client and that doesn’t have to have 78 pages for one super contribution. Let’s get this a little bit more tailored like other professions are.”
You cannot expect Bureaucrats to focus on the consumer, they are self fulfilling, and politicians – well enough said. Truly a hopeless situation meanwhile people cannot afford proper advise.
Agree client first is the correct approach and sadly was the motivation for what is now that “Gordian knot” of regulation.
(If anyone truly believes a retail client is well served under the current disclosure regime, they are delusional however, unpacking it needs very careful consideration.)
For example, the danger with single topic advice is that the ever present biases in the human condition can lead to a “blinkers on” approach and that can result in unintended (or ignored) consequences.
Further afield, when is that much touted concept of “professional judgement” going to be able to be fully demonstrated in all advice situations? Advisers need to be able to exercise this judgement appropriately if the shackles of regulation are ever to be loosened.
The review of the wholesale definition is a much anticipated piece of the current review. Let’s hope that common sense prevails and the definition is not prescribed but becomes as judgement for the adviser similar to the way the risk profile is assessed and agreed. Like the risk profile, the allocation of the wholesale definition to a specific client should be based on their intrinsic understanding and propensity for grasping financial concepts, not a balance sheet number or income level.
A process whereby the client and the adviser work through the indicators of financial literacy and decide on whether the person can get by with less disclosure.
Ultimately though the added disclosure doesn’t serve retail clients well and in fact, the wholesale client is often better informed of what is being advised and the consequences than the retail client with a strained arm from carrying the SoA away to read.
So, now we are having a review into why the measures introduced as a result of the last review aren’t working.
The most damning comment from Ms Scotchbrook: [i]”There’s no real contemplation of the different types of advice services and advisers that are out there in the marketplace.”[/i]
Surely the previous review should have ascertained all the variations in the market place and structured the regulations accordingly.
Instead, we’ve ended up with the typical one-size-fits-all approach favoured by a lazy bureacracy.
This is what happens when you leave it to bureaucrats who don’t live or work in the real world, and politicians who know nothing about the industry.
Or, you can see it for what it really was: a deliberate attack designed to force out most of the small players, so that only instos and industry super remain. But wait………aren’t they the ones making headlines every week, accused of ripping off their customers to the tune of $millions over decades, aided by a lazy and negligent ASIC? Whoops!