The government is working towards creating a single disciplinary body for financial advisers to supersede the existing code monitoring body plan, the assistant minister for financial services has outlined.

When asked directly about the progress of a code monitoring body at Licensee Summit Digital on Tuesday, Minister Jane Hume explained the government is working on a broader plan to “reduce the number of regulatory burdens on financial advisers”.

“How many regulators can go into a financial adviser’s office and audit them in a one year period is quite extraordinary. I am actually surprised some financial advisers don’t spend their lives being audited,” Hume said.

“We actually want to reduce the number of organisations that can infiltrate and impose on a financial adviser’s business so they can get on with what they do best.”

 

The original requirement for a code monitoring body came into existence under the same legislation that established the Financial Adviser Standards and Ethics Authority. Under this legislation financial advisers were required to be members of a code-monitoring body by January 1 this year to continue providing advice. Late last year ASIC took action to provide relief under the law for three-years in lieu of a code monitoring body being established.

But it’s the single disciplinary body plan that Hume is now focused on; she said the six month delay in the implementation of Hayne royal commission roadmap will provide time make that the code monitoring solution to be more “fit for purpose”.

A single disciplinary body was something first mentioned by Kenneth Hayne during his interim report in February 2019.

The Financial Planning Association seems to be following the government’s lead by pushing for a single disciplinary body and a licensing regime that’s more focused on individual advisers rather than a regime that relies on licensees to provide regulation oversight. As part of its five-year policy plan released this week the FPA has supported the move towards a single disciplinary body.

Financial advisers should be registered on a single government register, with this register being managed by the single disciplinary body, the FPA’s Policy Platform outlined.

“The single disciplinary body should have primary responsibility for government oversight of the conduct of financial planners, setting mandatory professional standards, investigating potential breaches of mandatory standards and law, and applying discipline,” it noted.

Whether the single disciplinary body is a step towards creating an individual licensing regime for financial advisers to superseded the current Australian Financial Services License system is unclear although it is certain to be on the government’s agenda.

The idea of individual licensing financial advisers was explored in ASIC’s 2017 ‘Report 515 Financial advice: Review of how large institutions oversee their advisers’ which outlines the “dual-agency role” advisers are put in because of the divergent interests held by clients and licensees.

The FPA has also made a fresh call for licensing individuals in its latest policy platform document which is consistent with the Association’s submission to the Hayne royal commission back in May 2018.

“In other professions like in the medical profession or in accounting, there isn’t a situation where the firm the you work is also responsible for taking away your right to practice,” De Gori told Professional Planner.

While the actions of the regulator to put oversight of FASEA’s Code of Ethics in the hands of licensees for now – when it granted relief from the requirement for advisers to be registered with a code monitoring body – ASIC won’t put itself in the middle of the code monitoring or the single disciplinary body discussion.

“Moving from that current model [where ASFL holders who are primarily responsible for monitoring and supervising their representatives and that the main licensing process] to where it happens at an individual level is really a matter for government, that is not a matter for ASIC,” Joanna Bird (pictured), ASIC’s executive director of wealth management said at Tuesday’s Licensee Summit.

The Licensee Summit Digital video content can now be accessed via the digital hub here.

 

Smith is the editor of Professional Planner’s print and digital platforms. He is an experienced financial journalist, editor and multimedia producer who has held senior editorial positions both in mainstream press and trade media.
3 comments on “Code monitoring to be superseded by bigger plan”
  1. Avatar Christoph Schnelle

    From an adviser point of view, individual licensing makes a lot of sense to me.

    The question is what the consequences of licensees are? Right now anybody can own a licensee but for accountants and lawyers (with a few exceptions) only accountants and lawyers can be in charge of partnerships.

    A licensee could become a service provider to advisers but would have no liability for the advisers’ actions. Wouldn’t that be a boon? Would that have a downside for consumers? Am I missing something?

  2. Avatar Jeremy Wright

    Minister Jane Hume stated, I am actually surprised advisers don’t spend their lives being audited.
    Advisers today are so distracted and so exposed to red tape and restrictive requirements, they are getting to the point where advising clients has become a Regulatory and Auditing burden.
    The system has never worked properly.
    How can a Licensee be held responsible for the actions of rogue advisers when a once a year audit that picks up actions that can be detrimental to clients, is picked up.
    The adviser who stole clients money, is responsible, not the Licensee who had nothing to do with it.
    The adviser should always be responsible for their actions and yet, this single disciplinary body, if it follows the maze of complexity that is the current Regulatory regime, will be a total disaster.
    What we have now is a system that uses legal wording, fear and intimidation to drive through Laws and Regulations that are way too complex and are a main cause for the massive decline in advisers.
    Using Lawyers to make policy, is always going to lead to confusion.
    Clear, concise rules that focus on the best interest of the client, is simple, yet what we currently must comply with, is the opposite.
    It is all very well to have a vision, the hard part, is to bring that vision to life, via a simple set of rules that allow private Businesses to build the economy.
    Look at the Financial services Industry today and it is easy to see that the direction the current Regulatory Regime has taken us, is off a cliff and must change NOW to a simpler, fairer system where all parties can abide by and build viable Business and client service models.

  3. Avatar Tom Reddacliff

    I think the FPA is on the money here. This is an essential move for financial planning to become a legally recognised profession under Professional Standards legislation. In turn this means a public liability scheme works alongside PI insurance. The hero in financial planning should be the individual financial planner and what they do for the client. Everyone else is the support crew, not the ticket to trade.
    Top quality licensees (Advice Groups in my terms) will be better off from this change. Advisers will want support (particularly in transition) to their individual obligations. If you’re offering quality, scalable services to support their practice and offer to client why would they leave. Change should be about a clear long term purpose and vision and then working through all the roadblocks and challenges vs. starting with them and just tinkering with a broken status quo. Who knows, maybe the case for tax deductibility improves with this change.

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