ASIC Commissioner Danielle Press has reiterated the corporate regulator’s belief that scaled advice should play a crucial role in the industry, and questioned whether licensees and their compliance divisions playing it too safe is to the detriment of advisers and their clients.

Speaking on a panel at the Professional Planner Best Practice Forum Digital 2020 webinar event this morning, Press said it was hard to measure whether practitioners are being overly conservative when it comes to compliance around scaled advice.

“It’s definitely different from the base level of guidance that we give,” she said. “And licensees will make that decision based on their business offering.”

The Commissioner said ASIC needed to address the disparity between the compliance standards they set and the application of them by the advice community, which may involve changing “some of the settings”. If ASIC’s advice isn’t clear, she said, “then maybe we need to look at our guidance”.

Press did note, however, that there are plenty of licensees building entire business models around scaled advice, which ASIC “has no problem with”. Indeed, she said, scaled advice is a key part of the plan to make advice more affordable and accessible for consumers.

“It may come as a little bit of a surprise to you but actually that’s what we want as well,” she said.

Press expressed some disappointment at the licensee community, whose adoption of compliance relief offered by the regulator – assumedly the recent early release of super advice measures –  has been limited.

“It does concern me a little,” she said, “when we say ‘here is some relief’, but some licensees say ‘that’s fine, we’re not taking that risk’.”

Conflicting standards

The regulator has come under fire recently for being disconnected from the real compliance burden advisers are facing, with ASIC’s retrospective ‘lookback’ program into past breaches reportedly precluding advisers from feeling comfortable with the current stated compliance boundaries.

“All that lookback stuff with ASIC has meant that advisers are looking over their shoulder,” said Story Wealth’s Anne Graham.

A similar line was taken by Press’s fellow panellist, Moran Partners director Paul Moran, who said advisers need to take a more conservative approach than indicated by ASIC to avoid complaints from a client that could escalate to the Australian Financial Complaints Authority.

“The conflicts occur because many of the standards that ASIC set don’t stand up in court,” Moran said. “[Advisers and licensees have] got to take a more conservative approach than just meeting what ASIC says is the required standard.”

Also on the panel, director of wealthadvice.com.au and chair of the Financial Planning Association, Marisa Broome, sympathised with compliance teams whose conservative stance is borne out of fear.

“Things like Reports 636 – which looked at the whole FDS issue and fee-for-no-service issue that was in place – and the AFCA 10 year ‘lookback’ has naturally led a lot of compliance people… to be incredibly conservative,” Broome said.

‘We’ve got to get over it’

Commissioner Press said she was “concerned” to read Professional Planner’s recent article citing advisers worry that their Statements of Advice met the regulatory standard, but were not compliant enough to satisfy legal teams.

“Well, it is the regulatory standard so it does meet the legal standard,” she said. “We’re not sure why that confusion exists, and we’re really keen to pursue that because I think we’ve got to get over it.”

As for licensees, she offered a theory as to why they may be wielding compliance at a higher level than required.

“I think some businesses and their compliance groups use the legislation to stop what they think are maybe less qualified advisers,” she said. “I don’t know, that seems to be my view, but at the end of the day the way they interpret the law and the risk is their choice.”

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at [email protected]
5 comments on “‘Conservative’ licensees hampering scaled advice: ASIC”
  1. ASIC’s mind-numbing musings continue to demonstrate how detached from the reality of providing advice that they are. How did they get invited to a forum with “Best Practice” in the name?

  2. Wow. What an incredible series of statements from our regulator.

    The way ASIC simply ignores FASEA and the Code of Ethics in their pronouncements is truly something to behold.

    To just wave them away like they don’t exist. Amazing.

    That’s why nobody used the COVID ‘relief’ – it completely ignored our obligations under the Code.

  3. Avatar Jeremy Wright

    ASIC make comments that scaled advice should play a crucial role in the industry, while at the same time forcing Licensee’s into retrospective look backs to 2008, which is causing mayhem for advisers who are desperately trying to juggle copious demands and look after their clients.

    It is all very well for one team of Lawyers and Compliance interpreters to debate with other teams of Lawyers and Compliance Interpreters, though all this does, is highlight that if they cannot agree on the terms, then what hope do the rest of us have.

    ASIC is an organisation that plays to a different tune and expects everyone else to jump at their whim.

    Fear is the reason why the Industry has not turned the table back onto ASIC, who are impervious to criticism.

    The comment from ASIC dismissing real concerns from Licensee’s who feel the regulatory standard did not satisfy their Legal teams and Danielle’s comment, “Well, it is the regulatory standard so it does meet the legal standard,” highlights that the world of Regulators and lawyers, is not conducive for the Industry to comply efficiently and confidently, let alone grow.

    Danielle Press’s last comment, points to her “interpretation” which is the main cause of angst for Licensee’s and advisers, in that a Court will determine the Grey areas, if it progresses to that point, at great cost to Licensee’s and advisers caught up in the maze that is the current regulatory environment.

    Things must change as the current system is a swamp of hidden dangers, rather than a well designed path with clear and concise signage.

  4. Avatar Michael Lorimer

    PI insurance could also be a factor in licensees’ apparent overly conservative approach.

  5. Avatar Craig Meldrum

    Let’s all throw the compliance managers under the bus, and get the bus driver to throw it into reverse for good measure. But seriously, as a compliance manager, I take exception to this kind of diversionary rhetoric. I have been very vocal (as have many other stakeholders) on the risks that licensees face, particularly with ASIC enforcement and look-back and particularly also with AFCA’s approach (which in many instances does not consider legal defensibility and instead leans towards a consumer outcome disguised as a fairness rule).

    I completely understand the need for scaled and single-issue advice and ASIC’s RG244 supported this. But I still have not heard Commissioner Press discuss, in a practical and implementable sense, or update the example advice document in RG90, to help licensees construct FASEA-compliant, scaled advice. Remember that even if an adviser complies with the ‘safe harbour’ steps in s961B(2), they may still not have complied with the duty under the Code to act in their client’s best interests. The explanatory statement provides two specific warnings … “you are not relieved of the ethical duty merely because the client does not provide enough information, even when asked” and “you should take into account your client’s express wishes but these do not override your duty to give advice that is in the client’s best interests.” In other words, scaled advice is possible, but an adviser can’t go straight for the scoped outcome. They have a broader requirement to explore all the explicit and implicit needs of the client before satisfying themselves that a scaled advice engagement is in the client’s best interest. And for ASIC and AFCA’s benefit, it needs to be evidenced.

    And simply because if you don’t laugh you’ll cry at this stuff, have a look at the witch burning scene in Monty Python’s “The Holy Grail” – it summarises this regulatory group-think quite nicely: https://youtu.be/zrzMhU_4m-g

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