Safe harbour provisions ‘not the problem’, says Stephen Jones

Mr Jones pointed out that while some of the compliance burden impacting advisers and the provision of advice is being driven by the legislation, a lot of it stems from the regulatory guidance around the implementation of the legislation.

“Another slice of it is coming from the legal departments of the product manufacturers and then another slice is perhaps done by the management apparatus within and advice firm,” he said.

“[It’s not as simple] as saying if we deal with that part [of the regulations] over there, then we’ll remove all the problems – you won’t.”

Mr Jones noted that the Financial Services Council and a number of other groups have pitched the proposition that the answer to resolving the issues around financial advice is to simply remove the safe harbour rules for the best interests duty.

“That seems to me to be incredibly wrongheaded. The safe harbour rules were designed as a beneficial provision for advisers. They have spawned into a whole bunch of regulatory provisions [but] the safe harbour rules are not the problem,” he said.

“Their entire purpose is to protect advisers, not to direct advisers and to spawn mountains of regulatory forms in the delivery of advice.”

Ms Abood said that while the safe harbour provisions for the best interests duty were originally intended to be protective and helpful, they have “mutated to become a separate behemoth of its own, adding to the cost and complexity”.

“It definitely needs to be looked at as part of the whole gamut of regulation,” she said.

Mr Jones said improving the regulatory framework around advice and increasing access to advice would require a number of different approaches.

“Our role as government is to design a market to ensure that it can be done safely, and a part of that is professional standards, a part of that will be default products, a part of that will be enabling robo-advice or part of it will be Commonwealth or the states providing direct services to people who need financial counselling,” he explained.

He also stressed that each part of the market would need different solutions.

“I’ve said in the past that there are three different areas with the market. There are high-net-worth individuals who will find a price point in the market regardless of what we do or don’t do. Then there are people of lower socioeconomic status who need financial counselling more than anything else. I think there’s a role for government for direct service provision in that area. However, the vast majority of Australians are in the middle of those two groups,” Mr Jones explained.

“[These Australians] are currently not getting the advice they need. So, we want to design a market that meets their needs, but I don’t think there is just one solution.”

While there has been a lot of enthusiasm from a range of firms and industry groups about the ability of robo-advice to meet the advice gap, Mr Jones said this would likely only be one part of addressing the advice needs of consumers.

“I think there’s a role for it, but to date, it’s been used as much as anything as a marketing tool,” said Mr Jones.

“There are some triaging benefits in that which I think are useful and some self-education things in that which are useful. There’s a role there and maybe somebody will come up with a business model that makes it work, but I think the majority of Australians actually want to talk to someone and have a conversation with a qualified person who knows what they’re talking about and get some advice.”

Mr Jones also noted that a lot of super funds are pitching the proposition that intra-fund advice is the answer to providing more Australians with advice.

“I’m very nervous about just opening up intra-fund rules and assuming we’re not going to have all of the same problems we saw ventilated in the Hayne commission,” he said.

“All of those incentives for value capture and value retention will be there irrespective of what the flavour of the fund is. So that’s not the entire answer either.”