In November last year, ASIC released Consultation Paper 332, which is aimed at exploring some of the problems associated with providing limited advice to consumers, including some of the impediments faced by firms operating under limited AFS licences.
Speaking to SMSF Adviser, BT head of financial literacy and advocacy Bryan Ashenden said the biggest barrier to the provision of limited or scaled advice at the moment is around confidence.
“It’s not about the regulatory framework so much as it is about advisers having the confidence that they can provide scaled or limited advice in a compliant manner,” Mr Ashenden said.
“If we think about everything that’s been happening in terms of the royal commission, the Code of Ethics coming into play and the discussion around Standard 6 of the code and the questions it raises around how broad advisers need to go and what circumstances they need to consider, advisers are quite rightly concerned.”
Mr Ashenden noted that the standards haven’t really been tested yet, and while there is guidance, there is still not a lot of confidence among advisers.
“It’s not that advisers haven’t wanted to do it, but I think with the environment that advisers have been through in the past couple of years, having the confidence to know that they can do it, that their licensee is going to approve, the regulators are going to approve and everyone will be happy with it, is still the biggest issue,” he said.
“You’ve got licensees imposing their standards, you’ve got professional indemnity insurance requirements and all these sorts of things that come into play and advisers are wondering, how far [can they] go?”
While Regulatory Guide 224 contained lots of examples about different ways that advisers could provide scaled advice, including advice on superannuation such as making additional contributions, transition to retirement and beneficiary nominations, Mr Ashenden noted that the guide was released back in 2012.
“That was pre-royal commission, pre-FASEA and so advisers are obviously concerned right now,” he said.
“I think the greatest example of that would have been during the period of COVID-19 when ASIC came out and said we’ll give relief in certain circumstances from the level of documentation that is required so you can do a record of advice instead of a statement of advice in certain situations.”
One of the other factors impacting the take-up of this relief, he said, was the maximum amount that could be charged for this advice.
“Obviously, an adviser has to be able to run an economical business because advisers want to be there for the long term, they want to be able to advise clients into the future. We always talk about [the importance of] valuing your advice, and so if the regulator says you can only charge up to this amount if you want to charge in a particular way, then you can’t do it,” he said.
Mr Ashenden said it was a positive sign that the regulator is undertaking a lot of consultation about how scaled or limited advice can actually work.
“As long as we can keep that discussion going, then I think we’re going to be on the right track to a good outcome,” he said.
He also noted that the government is looking to reduce the regulatory burden in the advice space and announced in December it would look to streamline the number of bodies involved in the oversight of financial advisers by winding up FASEA, expanding the role of the Financial Services and Credit Panel (FSCP) within ASIC and moving other functions of FASEA to the Treasury.
“I think that any announcement that looks to reduce regulatory burden and cost has got to be a welcome announcement,” he said.
“If we’re going to have FASEA wound up and certain pieces going to ASIC and some pieces going to the Treasury, we’ve got to make sure that it works correctly, and to do that we also need clarity about what exactly is going to go where and how it’s going to work, and again, we can’t just leave that to government to decide — again it’s part of that consultation, so whether it’s advisers or licensees, everyone has got to work together to get to the right outcome.”
The scale of the advice is not the issue here, its the scale of the due diligence, particularly for someone who wants superannuation advice. There is no limited scale associated with the “know your client” rule.
This is a kin to going to the doctor with a hang-nail, and the doctor being compelled by law to give you a complete range of blood tests and a full body MRI, before he can fix your nail.
If you go to a professional with a problem, the professional should be free to assess you, look deeper [u]if required[/u], but advise you accordingly. That can’t happen because the licensing regime refuse to acknowledge financial advisers as professionals.
There has to be some risk in any licensed profession that there will be mal-practice. ASIC and the Regulators want “zero risk” which is totally impractical, and as we have seen, unworkable.
If the Government want the public to have access to advice, it time they took a step back. Put regulation of financial adviser in the hands of a professional body, like other professions. The Government has created a substantial body of standards of advice, but its time to take a risk and step back and let the private sector run it.