The Assistant Minister for Superannuation, Financial Services and Financial Technology, Jane Hume, has highlighted the importance of scaled advice in getting the industry “back off life support” after the pandemic and urged ASIC to be more proactive in rolling out fintech solutions that reduce red tape for advisers.

Speaking in a link-up with Conexus Financial chief executive Colin Tate at the Professional Planner Digital Licensee Summit this morning, Hume said the entire financial services industry needs to do things “differently”.

“We’ve got to reduce the burden of red tape, improve productivity and lift the output per worker while maintaining the quality of the output,’ Hume said. “That’s going to mean a far more prominent role for single-issue advice.”

The minister highlighted ASIC’s April regulatory amendment allowing advisers to provide advice on early access to super under records of advice (ROA) as an example of the type of low cost, low compliance advice the industry should be looking to provide.

Continuing the theme, Hume spoke of the government’s desire to embed ROAs more heavily into the advice process at the expense of lengthier and more expensive statements of advice, much of which she called “boilerplate”.

“There’s probably greater roles for ROAs and we’ve seen that,” she said. “SOAs are potentially too large and cumbersome and they’re not read by clients, there’s better ways of doing business.”

In a candid exchange, Hume acknowledged the government’s own role in streamlining the industry and pushing to reduce red tape, saying it needed to focus more on “identifying opportunities of overlap and the duplication of regulation”.

She also flagged the need for the corporate regulator to work with fintech providers to bring next generation tools to advisers, which she said has the potential to be a “potent” multiplier of productivity.

“It’s going to involve the regulator having a much greater role, they’re going to have to be much more forward leaning in their approach to the roll-out of technology that helps advisers do their jobs,” Hume said.

Part of ASIC’s role will be “regulating the algorithms”, Hume continued, and being ready to approve solutions as they come to market. In turn, this will make ASIC’s job easier as well.

“That means they can spend less time auditing after the fact,” she said. “Facilitating the rollout of those algorithms for advisers means there’ll be much greater consistency available in the delivery of quality financial advice.”

ASIC has a ‘regulatory sandbox’ available for fintech companies to test certain products or services for up to 12 months without an AFSL, and chair James Shipton has previously flagged the role of the regulator in working with these companies to bring tools to market.

Understanding the impediments

In a subsequent session a the licensee summit, ASIC executive director Joanna Bird said it was “not surprising” there was concern about the provision of affordable, quality advice given the institutional exodus from the industry. Findings from the regulator’s ‘unmet advice needs’ project, she said, confirm Hume’s assertion that people are looking for cheaper, less complicated advice.

“Our research tells us what consumers want is scaled affordable advice, and we know – because industry tells us – that industry has great troubles delivering scaled and affordable advice,” Bird said.

“So we want to understand the impediments to delivering that scaled and affordable advice and to what extent those impediments are something the industry or ASIC or both bodies can deal with together.”

 

4 comments on “Scaled advice, ROAs and fintech key to industry recovery: Hume”
  1. Avatar

    The single biggest impediment to scaled, affordable advice is mis-guided regulation. If Fintech can somehow resolve this – bring it on. But I suspect a bit more is required. ASIC needs to stop imposing idiocy on the industry and in fact, needs to wind things back. If ASIC will not take the initiative and do that, I would urge the Minister to intervene.

  2. Avatar
    Phillip N. Alexander

    Jane and Joanna are on the right track.
    Could it be the industry itself has become a little too precious about providing wholistic advice to the high net worth market?

  3. Avatar
    Jeremy Wright

    Jane Hume has shown a consistent awareness of what the issues are and is a beacon of light in a very dark space.
    Scaled affordable advice is and always has been the best way for Australians to attain their most important need at that moment.
    The vast majority of people cannot afford to pay for complex advice and hence, 80 percent or more of Australians are now locked out.
    It has been said many times and the only solution to remedy the terminal decline in Life Insurance advice, is to separate it from Investment advice to make it viable.
    We have sent to APRA and the Prime Ministers office, a 6 point plan that will at NIL cost to the Government, turn the advised Life Insurance Industry around.
    We heard back from APRA who is sympathetic to our strategy, though have said ASIC ultimately will be the decider going forward.
    It would appear that the Government will need to step in and tell the Regulators what needs to be done, or these issues will continue and thousands more advisers will leave the Industry, which is already massively under resourced and depleted.

  4. Avatar
    Graham Hutton

    As is often the case, our regulator and government discover what we (advisers) knew all along. The cost of advice / compliance burden as always is carried by the consumer, who is increasingly less able to afford the advice. Many businesses are finding that this (cost) is marginalising many of their clients. Many of whom really need only simple risk advice and the occasional “tweak” with their accumulation phase super. But a $3,000.00 fee is disproportionate and unaffordable.

    Reduced commissions are a major sore point here. The client hasn’t seen any benefit from this, and in my opinion is unlikely ever to do so, the adviser can’t afford to provide the advice for the paltry commissions we are now saddled with. So a system predicated on fairness is unfair to all. But what would I know, I only have 37 years at the coal face dealing with mums and dads and small business.

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