Senator Jane Hume has earmarked the proposed adviser disciplinary body as being a crucial step in the industry’s march to professionalism, along with the continued adoption of scaled or ‘single issue’ advice and further adoption of fintech to drive down costs and increase efficiency.
Speaking on the inaugural Conexus Institute’s Exploring Big Ideas webinar, the Assistant Minister for Superannuation, Financial Services and Financial Technology singled out the single disciplinary body plan – which has superseded the government’s earlier ‘code monitoring body’ idea – as key to the industry’s resurrection.
“The advent of a single disciplinary body… that is going to be a turning point in this industry,” she said. “It will give a lot of certainty as to how [advisers’] code is monitored, but also to how they are disciplined… and what the expectations are for their professional behaviours.”
Hume said the industry’s transition to a profession was a “tough one to make”, but that the difficulty was due to its roots rather than the character of people involved.
“The vast majority of people I’ve met in financial advice are extraordinarily goodhearted and wise and judicious in their decision making on behalf of others,” she said. “But maybe because of the history of the profession – it came from a sales background and is now moving to a profession – that’s going to be uncomfortable to some.”
When asked by the session host, Conexus Institute CEO David Bell, how to fix the advice gap between those that have access to affordable advice and those that don’t, Hume was quick to cite the need to reduce the compliance burden.
“We probably need to bring down the cost by making financial advice simpler,” she said. “People talk to me about an 80-page statement of advice, that’s kind of crazy stuff.”
Regulators, policymakers and industry also need to look more acutely at scaled or “single issue” advice, Hume continued, just as ASIC did with superannuation early-access advice near the start of the pandemic.
“So many financial advisers really stepped up on that one particular issue,” she noted, adding that the intention was to “leverage” that willingness into more single-issue spaces.
The Senator repeated a common refrain for more input from fintech into financial advice, but steered away from any indication of whether the government believes institutions or super funds were considered as “natural homes” for advice.
“I don’t think that’s for the government to say, I think that’s a role for the private sector,” Hume stated. “The government doesn’t like to shape an industry like that, it should be demand driven so I wouldn’t want to be too prescriptive.”
Spot on Craig
The way the industry is presently going, many experienced and caring advisors will be gone by 31/12/2021. This of course is when the FASEA exam must be successfully completed.
It is not the exam itself but the fact that many of us just cannot see past the extreme level of compliance just to try and help our customers navigate the financial minefield we now live in. The exam is just excuse many of us will use to give us an exit date..
Less advisors will only drive up the cost to the consumer.
We are heading in the wrong direction very quickly.
With all due respect, I think that last line is a cop out. The industry is largely in the mess that it is because of constant government intervention and over-regulation to the point of destroying the industry. The 80, 90 and 100 page SOAs are industry’s response to the weight of the legislative and regulatory obligations.
I remember more than a decade ago when former FPA CEO Jo-Anne Bloch stood on stage at an FPA conference and during her opening speech dumped a mail sack full of advice documents on the stage floor exclaiming even then that advice documents were too long, and that was pre-FoFA. So I can’t abide the fact that the government is somehow surprised. It is surprising however that the Senator congratulated ASIC on the relaxation of measures for early release from super but it was not something that was able to used effectively in practice. Advisers could not produce it for the capped fee of $300 (many advisers just did it pro bono) and it was non-compliant from a FASEA perspective. We need the political will (and for government, regulators, AFCA, the associations and other stakeholders to come together) to amend FASEA to allow for affordable, single issue advice and we need the Corporations Act and regs amended to repeal the safe harbour and other elements so it harmonises with FASEA.
SOAs and ROAs should become more of a professional Letter of Advice, rather than reams of legalisms written to defend later claims through AFCA and the courts. Oh, and if the accounting and tax professional is the model for what professional financial advisory should look like, we need to review the PI and claims structure the industry is subject to and move to a limited liability scheme (and truly separate advice and product) rather than put more cost on the industry with a compensation scheme of last resort. If nothing else, look at the humble client and ask yourselves the question, how do we as professional advisers best help that person.
The model is broken if the mass market can’t afford professional advice and has to rely on conflicted intrafund advice which is naturally geared to retention of assets in the in-house product and if mass affluent and middle market clients can access advice, they get 80 pages which is only going to be fully read by AFCA and the courts in a claims situation or ASIC during an enforcement campaign. So, with all that, I don’t see the disciplinary body being the panacea that the Senator thinks it will be.