* Financial Regulation Exit

The financial advice and indeed the broader financial services industry has found itself holding a basket of reforms and half-cooked regulations which are mostly ill-fitting, plagued both by gaping holes and unfortunate overlaps.

Far from thoughtfully conceived, these reforms have been rushed into existence by a government keen to change the public’s perception that it has been weak on policing and regulating the sector.

Rather than spend the time required to design reforms to shape an industry – giving credit for the ground already traversed as well as for the challenges ahead – government has decided to move quickly and base its new regulation roll out solely on the findings of a royal commission that, while desperately needed, was clearly retrospective and focused solely on misconduct.

Experts in policy and government reform who spoke with Professional Planner believe it is unlikely much of what has already begun can be stopped, and that genuine reform won’t begin until much of what is currently in the pipeline makes its way through the system and a review is conducted.

Despite all the effort, lobbying and posturing over the last year and a half, many believe that the sector – the fourth largest in the country accounting for close to 10 per cent of total business investment (GDP) – is heading for an inevitable FREXIT (financial regulation exit).

Far from being a victim in the current policy and regulation quagmire, though, the financial services sector and the financial advice industry in particular only really has itself to blame.


For 20 years or more, retail financial product manufacturers led by the big four banks have done their best to appropriate advice for the purposes of product distribution. These institutions have used their power and influence as the largest employers in the industry and the most-widely owned by individual and institutional share-holders, to lobby government, to influence regulators and to keep the moral checks and balances at bay.

But when you strip back all of the years of awkwardly designed policy, watered down legislation and layers of regulatory guides, at the core of its guiding principles still exists the beating heart of a fiduciary duty advisers have to their clients.

“Unfortunately the financial advice industry has tried to forget this or pretend it doesn’t exist, but it already has the duty of a full and frank disclosure as a fiduciary, without which you can’t act,” says Scott Donald, University of NSW Law’s director of the Centre for Law, Markets and Regulation. Donald points to the so-called ‘suitability rule’ that came into existence almost 35 years ago in 1986, which made it “pretty clear” back then advisers were fiduciaries.

“Layers of legislative architecture have been put on top of these general fiduciary obligations designed to make clear what it meant, but either through ignorance or deliberately advisers haven’t been meeting their obligations and it hasn’t been enforced,” he says.

It was the regulators ASIC and APRA that came under considerable fire during the Hayne hearings and in the subsequent reports for not regulating effectively and for the close relationships they had built with industry and in particular large institutions.