The release of ASIC’s Consultation Paper 332, Promoting access to affordable advice for consumers,  represents both an acknowledgement from the regulator that the current framework doesn’t support the commercial provision of scaled advice and a willingness to rethink the compliance regime around it.

The paper, which asks advisers for help in understanding “impediments to the delivery of good quality limited advice”, contains several key passages that show ASIC is as willing as it’s ever been to leverage adviser input in finding a solution to the advice gap.

ASIC asks advisers, for example, specifically where they think the cost of compliance could be minimised: “What costs inherent to the provision of advice most affect the ability of your business to provide lower cost personal advice?” the paper asks. “How could these costs be reduced?”

The regulator also reveals an awareness that their previous guidance hasn’t provided enough certainty to advisers. “Despite our guidance and the acknowledgement of limited or scaled advice… many financial advisers and advice licensees remain uncertain about how they can provide compliant limited advice,” the paper states.

Both these points highlight a change in tone from the ASIC. In response to a confluence of events – including “widespread concern” that adviser numbers have dropped 14.6 per cent since January 2019, the preference of consumers for scaled advice and the inability of advisers to commercially provide it – the regulator is signalling that it is significantly more invested in building a bridge between itself and the industry.

“We welcome feedback from the financial advice industry and others with an interest in making advice more accessible to consumers,” Commissioner Danielle Press said in a statement accompanying the paper.

The change in tone is even more stark given that Press herself recently intimated that overly conservative licensees were the ones holding advisers back from delivering scaled advice.

This time around the regulator acknowledged the reluctance of licensees to encourage scaled advice, but attributed it to “uncertainty” rather than subversion.

“We have also been told that, due to the uncertainty about providing limited advice, some advice licensees have restricted their financial advisers from providing limited advice to consumers,” the paper states.

Calculated and open moves

The timing of ASIC’s effort to work more closely with the industry is savvy. With the institutions now effectively out of the picture after withdrawing from advice over the last three years, many legacy interests have been disassembled.

In a further display of its willingness to engage, ASIC is looking for input from advisers on whether it should change the accepted term for “scaled” advice to something like “episodic”, “transactional”, “piece-by-piece”, or its preferred “limited” advice.

Even the presentation of its guidance is ripe for input from advisers.

“We are considering new formats for our guidance,” ASIC states. “What form of guidance would you find most useful for future ASIC guidance on limited advice?”

Another change for ASIC in this consultation is its timeline. Notorious for previous consultations that tended to meander and lose their efficacy, the regulator has pinned this one down to a closing date of January 18.

Positive legal reception

Legal and regulatory experts agree that the consultation paper is a landmark event, and have applauded ASIC for its increased willingness to work with advisers.

Mills Oakley partner Mark Bland called the consultation a “great initiative”, while Minter Ellison partner Richard Batten labelled its release an “important development”.

“It is positive to see ASIC reaching out with such an open-ended set of questions about the issues,” Batten added.

Batten believes the best thing to come out of the consultation would be certainty for advisers and licensees about how to provide scaled advice without skirting regulatory breaches.

“ASIC has made in clear in its guidance that advisers are responsible for ensuring that the scoping of advice is appropriate for the client which puts the onus and risk on them,” he says. “That is why licensees restrict it and advisers are not comfortable with it.”

Bland says a key theme that is likely to emerge during the consultation will be the demarcation between ASIC’s guidance on scaled advice and the Code of Ethics advisers need to adhere to as part of the Financial Adviser Standards and Ethics Authority’s mandate.

ASIC states that it is aware advisers struggle to straddle both the Corporations Act and the Code of Ethics, and that “it may be difficult for industry participants to understand the regulatory requirements” for limited advice provision.

“From our recent engagement with industry, we understand there are concerns about compliance with legal obligations, including the [Code of Ethics] set by [FASEA],” ASIC states.

Likely output

The 2020 consultation paper – which is part of ASIC’s broader Unmet Advice Needs project –will culminate in a series of stakeholder meetings in early 2021.

The likely output from the consultation is unclear, with an ASIC representative saying it will depend on the nature of the feedback and ASIC’s interpretation of the changes required.

“ASIC isn’t committed to a specific course of action, however it’s likely some form of revised guidance will be part of the response,” the representative added.

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]
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