In an online opinion piece, SMSF Association policy manager Franco Morelli said it’s clear that the current financial advice framework is in need of change.
“Over the coming years, policies will need to be focused on removing the need for multiple licences, registrations, regulators and associated levies to reduce the costs of providing financial advice,” Mr Morelli said.
Mr Morelli explained that the complex limited licence framework for SMSF accountants and advisers, the carve-out for intra-fund advice for superannuation trustees and the lack of clarity around scaled advice for licensed advisers can all provide different advice outcomes.
“Breaking it down, it is the ability for professionals to provide specific single-issue advice or ‘scaled advice’ that is extremely limited. The ability for consumers to receive consistent, affordable and scaled advice around just superannuation likewise,” he explained.
“In addition to the factors mentioned above, it is also FASEA standards, a new code of ethics and, in some cases, licensee influence that further make the provision of ‘scaled’ advice challenging.”
Regulatory hurdles, he said, are making the provision of advice difficult at a time when there are unmet advice needs in the market.
“No clearer evidence of that was the need for ASIC to provide relief to industry so advisers could provide affordable and timely financial advice during the COVID-19 pandemic. This allowed registered tax agents to give advice without an AFSL and provided for licensed advisers to use a Record of Advice rather than a Statement of Advice,” he stated.
He noted that ASIC is conducting a review into this advice gap and unmet advice needs.
“ASIC wants to understand the impediments to delivering scaled and affordable advice and to what extent those impediments are something the industry or ASIC or both bodies can deal with together,” he said.
Their research, he said, indicates consumers want scaled affordable advice, but the industry has great trouble delivering scaled and affordable advice.
“In addition, Senator Hume has indicated a broader and more prominent role for single-issue advice,” he added.
Mr Morelli said as part of any policy changes, the government and the regulators will need to address some of the current issues and blockages.
The FASEA code and conflicting guidance from ASIC, for example, may be restricting advisers from having the full confidence in providing scaled-down advice specific to a single issue.
“Do advisers have the real ability to provide scaled advice and ‘scale up and down’ aspects of their advice when they are aware of other client circumstances that currently forces them to be more comprehensive than the client desires?” he questioned.
“Surely, it is the consumer who is able to demand the advice they require, with the adviser providing the appropriate scoping.”
If these questions can be addressed, the “provision of single-issue advice may not be far away”, he said.
“If single-issue advice can be implemented effectively for advisers to provide affordable, understandable and quality recommendations to consumers, then we can move onto bringing even more appropriately qualified trusted advisers into the advice framework who wish to provide just this type of advice.”
A small number of Fin-tech companies, including Financial Mappers, developed ways to deliver the RoA “Short Form Covid-19 Super Access” at the request of the FPA. Perhaps ASIC should talk to those Fin-techs with already developed solutions to give affordable scaled advice to all consumers, while still being economically realistic for the adviser.