New proposed advice framework highlights current ‘tick-a-box’ approach to compliance
The financial advice industry bodies have praised a new proposed advice framework put together by the Financial Service Council (FSC) which it says could reduce the cost of advice by almost 40 per cent.
Last Monday, the peak body released a white paper which outlined a framework that could cut costs by almost $2,000 through recommendations that include raising the threshold under which clients are identified as retail clients with those with assets of less than $5 million, abolishing the safe harbour steps for complying with the best interests duty and removing “complex” SoAs in favour of a letter of advice.
On Thursday, FPA CEO Dante De Gori threw his support behind the proposal and said it must be acted on ahead of the government’s implantation of the Better Advice Bill next year which will expand the role of ASIC’s existing Financial Services and Credit Panel to operate as the single disciplinary body for financial advisers.
“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,” Mr De Gori said.
“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.
“The creation of a personal obligation to register is an essential component of any professional framework and this is essential to achieving the outcomes the FPA and FSC have recommended in our respective policy visions.”
The Association of Financial Advisers (AFA) also welcomed the FSC white paper as an important contribution to the ongoing debate about the need to fix the financial advice regulatory regime.
AFA general manager, policy and professionalism, Phil Anderson, stated that a number of recommendations were included in the white paper 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 a [statement of advice] to a letter of advice, and the recommendation that financial advice be tax deductible,” he said.
“We also welcome 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.
“This paper is an important input into the 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.”
Tony Zhang
Tony Zhang is a journalist at Accountants Daily, which is the leading source of news, strategy and educational content for professionals working in the accounting sector.
Since joining the Momentum Media team in 2020, Tony has written for a range of its publications including Lawyers Weekly, Adviser Innovation, ifa and SMSF Adviser. He has been full-time on Accountants Daily since September 2021.
