Senator Jane Hume has doubled down on her criticism of compliance teams within AFSLs and accused them of going overboard with “red tape”, while at the same time announcing that those same licensees will remain in charge of monitoring advisers’ adherence to the Code of Ethics for a further year while the government continues its work on creating a Single Disciplinary Body.

Speaking at the Stockbrokers and Financial Advisers Association’s 2020 online conference on Friday with SAFAA CEO Judith Fox, the assistant minister for superannuation, financial services and financial technology revealed the government won’t be ready to launch the single disciplinary body by the end of this year.

“One measure that I know you’re all particularly keen to hear about is the recommendation for a single disciplinary body for financial advisers,” Hume said.

“The government is still working through the details of the body and Treasury has been consulting very widely with the industry on its design features,” she continued. “We will have more to say on this in due course, however I can confirm that with the six-month delay of the royal commission commitments, the legislation to implement the single disciplinary body will too have to be delayed and will now be introduced at the end of next year.”

Pressed on further detail by Fox during a Q & A session, the assistant minister explained that licensees have always been in charge of monitoring compliance according to either the standards of the Financial Adviser Standards and Ethics Authority or their own internal benchmarks.

The observation came with a pointed rebuke for licensees, who she said sometimes, “believe it or not”, have higher standards than FASEA.

“One of the things we are seeing now is that compliance seems to be in layers,” Hume said. “The corporations law will say this, the Code of Ethics will say that, ASIC will say, you know, ‘we apply the law’, and it’s in fact compliance managers within the AFSLs that are demanding a higher level, again, that are causing much of the red tape and the paperwork.”

The minister also reiterated previous calls for a more prominent role for single-issue advice, the importance of fintech in providing solutions for the industry, and the role of ASIC in working with industry to find workable solutions to compliance issues.

‘Crazy stuff’

Hume made clear that while the government isn’t ready to kick-start the single disciplinary body plan and licensees will remain in charge, she sees over-exuberance from compliance teams as being part of the red-tape burden advisers are facing.

In mid-July Hume first flagged to Conexus Institute CEO David Bell that the government took a dim view of over-cautious compliance teams, with unnecessarily long statements of advice being a major issue.

“People talk to me about an 80-page statement of advice, that’s kind of crazy stuff,” Hume said.

After ASIC also came out and said that conservative licensees were hampering scaled advice, advisers pushed back, with Story Wealth’s Anne Graham explaining that advisers and licensees are too terrified of the ongoing ‘lookback’ requests being conducted by the regulator to ease off on compliance.

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

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

“Things like Report 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.

In March ASIC revealed that it had only received six Code of Ethics breach notifications from AFSL holders since January.

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]
One comment on “Hume lashes licensees while extending their oversight”
  1. Avatar Jeremy Wright

    Legal interpretation of Regulations and Laws that are opaque, creates confusion and chaos for the people at the coal face who actually do the work.

    It is all very well for Lawyers, Regulators, Politicians and audit teams to have differing views and interpretations and in actual fact, it creates more revenue and work for them while they are having lengthy discussions.

    The fact that they are destroying thousands of advice businesses and are instrumental in 90 percent of Australians who going forward, will not be able to afford advice, seems to matter nought.

    The important thing, is that they are a protected species, no matter what the implications are to the vast majority of the population.

    This circus needs to be reined in before the whole of Australia becomes a basket case of economic failure, which is the direction the above mentioned, are sending us all.

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