One of the interesting insights to come out of the ‘How to Regulate Advice session at Professional Planner’s Best Practice Forum was ASIC’s assessment that licensees themselves were being too conservative around policy guidance. That is, it was observed that licensees were going far beyond ASIC’s guidance, which in some circumstances had been to the detriment of scaled advice.

We have given advice and provided support to a number of licensees and other financial services businesses trying to navigate the complexities by improving their policies, governance, process and people. Based on our experience there isn’t a shortage of licensees that are trying to do the right thing, and they all want to support advisers, who in turn want simple clarity of what to do.

While we understand why ASIC may make this assessment regarding over-reach, when you have a deeper appreciation of the risks, complexities and challenges for both advisers and licensees at the coalface, you can make a strong argument that this is in fact a by-product of how we are structurally set up as an industry.

Industry challenges

The core element of these structural deficiencies is that our advice processes are not well designed or fit-for purpose. We have cobbled together an advice procedure over the years across multiple systems with too many steps, and the complexity means it’s easier to get compliance wrong than right.

Our businesses are often reactive rather than proactive and licensee staff are too often stretched, which means they are reacting and putting out fires after the fact.

Our advice policies are also inconsistent and can be problematic; while some of the better resourced licensees are doing a great job, we find that most policies are out of date, impractical, unclear and often inconsistent across licensees. This is further exasperated by weak change management when policies are delivered. We lack a central set of rules to govern how to give advice in this industry.

The governance forums which are in place at a licensee level aren’t always effective in asking the right questions, as typically our data is lagging. Again, this leads reactive compliance.

We are not collaborating as effectively as we could; due to the way our licensees and advisers are set up, there isn’t enough sharing of tools, support and guidance between groups in the industry. Whilst we are seeing this shift slightly in recent times, stakeholders continue to hold onto their own intellectual property while other groups need support.

Drawing plans for a refit

Almost all of the observations above can be linked back to how we are structured. Whilst some of the solutions are already in motion, and not without their own complexities, there are a few essential elements in any structural refit of the advice industry.

The government’s as-yet unformed Single Disciplinary Body should be tasked with providing a single set of policies that crystallise simple, principles-based guidance covering ASIC, FASEA, TPB, AUSTRAC and OAIC and then work with industry regarding practical implementation. This simpler model will not only provide a benchmark for the industry but will also go towards demonstrating a unified approach which builds trust with clients.

Resourcing issues including the availability and affordability of public indemnity insurance cover must be addressed before we embark on changes in licensing.  Whilst we are agnostic around the recent debate around individual adviser registration we must deal with these issues as a first step before we contemplate changing our authorisation structures.

Separating product advice from strategic advice is an issue worth revisiting and we think it could be a potential game-changer (provided it is supported by the right process, clear instructions and technological support). Thinking about our industry from this lens could also help make advice more accessible and affordable for consumers.