The SMSF Association will be working with professional accounting bodies and the Financial Planning Association to press policy makers for a rethink of the advice framework that separates strategic advice from product advice, the association’s CEO John Maroney told attendees at a breakfast before the opening of the group’s annual conference on the Gold Coast.
Maroney highlighted that the accounting profession’s limited licensing carve out “hasn’t worked very well” because clients who seek advice don’t want to be limited by regulation in terms of the advice they receive by their trusted professional.
“We should have the ability for strategic advice [to be given by] highly qualified, highly ethical and highly competent people, but that shouldn’t have to be done through the whole rigmarole of SOAs [statements of advice],” Moroney said on a panel discussion during a BT thought leadership breakfast alongside Rice Warner’s Michael Rice, Investment Trend’s Michael Blomfield and Challenger’s Jeremy Cooper.
“The whole framework has to change and I believe that, and more and more voices are supporting that,” Maroney said. He added that the SMSF industry’s peak body had coordinated a lobbying effort with the three accounting bodies and the FPA for a rethink of the advice policy framework to separate strategic from product advice.
Maroney confirmed with Professional Planner he is working with representatives of the three accounting bodies – Chartered Accountants of Australia, Institute of Chartered Accountants and the Institute of Public Accountants – for an acknowledgement that strategic advice falls outside the definition of general and product advice, and to have it recognised by lawmakers.
“We are trying to get recognition that the current system is broken, that it doesn’t work. It’s not accessible and not affordable,” he said.
“I think until we get recognition that the current system isn’t working for most Australians and that something better needs to be put in place, it won’t be possible to move down the path of how to do it,” he said.
Policy head space
Maroney’s comments also highlighted the challenges associated with getting policy makers to stand back and look at the whole advice framework at a time when Treasury is busy implementing Hayne’s royal commission recommendations.
“That actually does require work with government, with regulators, and that’s going to take time because we are still in the process of implementing reforms that have taken the last 5 years to arrive at, with FASEA, with higher education and ethical standards,” he noted.
“I don’t have the solution to roll out today, we are working with other groups on that,” Maroney added.
Senator Jane Hume, the minister for superannuation, financial services and financial technology, spoke during the opening session of the conference on Wednesday; during her speech Hume referenced the time Maroney and representatives of the SMSF Association have spent with her and the Morrison government’s staff discussing policy in this area.
“There probably needs to be an introduction of a different form of financial advice, different to advice that focuses around products,” Maroney said. “We think the world has changed from the idea of financial advice as product advice, that’s a 20 year old idea.”
“Look at other sectors in society, we don’t keep rehashing out 20 year old paradigms about what advice means, what cars you drive, what internet you use; so I think a recognition there is a real role for strategic advice separate from product advice, that need to be clearly defined what that means,” he said.
The biggest farce in financial advice is the necessity for SoAs. Clients don’t want them. They cost advisers time and clients money and the only benefit is protection of the licensee/adviser. Imagine if accountants had to put in writing every piece of advice they ever give a client, including the basis for the advice, how it meets the client needs and what the alternatives are. Comprehensive, contemporaneous file notes signed off by clients as accurate and signed Authorities to Proceed should be all that is required. Wouldn’t THAT be nice?
John the problem with your argument is that clients don’t differentiate between advice and product.
The reality is that we live in a litigious world and other professionals’ existence is reliant on finding fault and gaining compensation.
So in the eyes of prosecutors, your well thought through, researched, recommended and advised “strategies” are still viewed as potential risk and a liability.
Hence the reason “people of trust” strategic advice needs to remain and be documented within the advice and SoA process.
This may result in greater, short-medium term, costs and inefficiencies however when trust is lost it always takes longer and more…. to be rebuilt.
The issue has been and continues to be a maze of complexity.
The Government has made the same mistake that Big Business makes, in that they are incapable of making decisions based on common sense and easy implementation.
Instead, they refer to the Legal profession, who are incapable of doing anything that makes the process easy to understand and implement.
The world has gone into a self induced decision paralysis, unless a Lawyer is there to oversee the running of the Business.
I have been saying (not advocating) for years that the whole process is unworkable and my Business that has been operating successfully for 32 years, is going to be forced out of the Industry, with NIL positive outcomes for anyone or any entity.
THINK ABOUT THAT CLOSELY. The purpose of change is to improve outcomes and services for customers and be a boost to the economy.
If the regulatory regime creates restrictions of trade, which is what we are faced with now and yet, does not improve outcomes for anyone, which includes the private Business sector, Government and all Australians, that ideology is a major flaw that will destroy growth and investment in that sector.
The solution is to take the Lawyers out of the process, start again and have a mandate that any regulation must pass a practicality test, as well as a fairness test and most importantly, bring back common sense, as that has always been the benchmark for a viable Industry.