The SMSF Association’s CEO, John Maroney, has accused licensees of putting self-interest and profit ahead of advisers and consumers in a submission to ASIC’s consultation on access to affordable advice.
Maroney said SMSF Association members have indicated the layer of compliance levied by some AFSLs “prioritises their own self-interests” rather than the provision of advice.
Further, the CEO states, “some AFSLs have a bias towards revenue generation and ensure that their compliance guidance attracts the least number of complaints.”
Echoing a charge made by ASIC Commissioner Danielle Press at Professional Planner’s Best Practice Forum last year that conservative licensees were hampering scaled advice, Maroney accused AFSLs of having a “very risk-averse attitude” and an undue fear of the corporate regulator. “This has forced AFSLs to create an additional burdensome layer of compliance to mitigate their risk,” he states.
In the context of SMSF advice provision, Maroney notes that small AFSLs give advisers “less friction” than larger licensees. “These advisers found their licensee understood SMSFs and were comfortable providing SMSF advice that did not have excess compliance.”
Maroney joined a growing chorus of industry stakeholders pushing for an expansion of self-licensing or the introduction of individual registration for advisers, coupled with the relegation of AFSLs to service provision.
“Expanding the ability for advisers to be self-licensed or more responsible for the advice they provide should be a consideration for a future advice framework,” the submission states. “With the regulation of financial advice requiring individual registration and oversight, AFSLs may only be maintained to provide regulatory oversight of financial products and provide conduct monitoring and IT services to advisers…”
Work on your image
The SMSF Association’s submission contains 13 recommendations in total, each contributing to an overarching view that the regulatory framework for advice is “complex and convoluted”, as well as being “lengthy, costly”, and prioritising the needs of licensees over consumers.
While advocating to mitigate these concerns, Maroney credits ASIC for consulting with industry and taking “initial steps” towards the goal.
Several of the association’s recommendations related to the broad advice spectrum, such as a call for less double handling with file notes, a comparative study of wholesale advice and a review of the “purpose and usefulness” of SOA’s.
Other recommendations catered to SMSF specialists, such as its call for the limited license provision to be abandoned in favour of a “strategic advice” framework and a call for better guidance on limited (ie scaled) advice.
“When advisers wish to provide limited advice, such as the commencement of pension, the cost solely for the paraplanning and compliance can comprise a large fraction of the fee that needs to be charged by the adviser,” the submissions states. “This undermines the economics of the financial advice process.”
Maroney devotes particular attention to ASIC itself in the submission, encouraging the regulator to continue engaging with the industry and even giving suggestions on ASIC’s image maintenance.
“ASIC’s role as the ‘corporate cop’ tends to intimidate the advice industry,” the submission states. “The SMSF Association believes a step to resolving this tension is for ASIC to continue to consult and engage with industry when appropriate…”