Actuarial consultant Rice Warner has repeated its call for the advice industry needs to be restructured in a submission to ASIC’s ‘access to affordable advice’ consultation calling for advice compliance and delivery to be separated by levels of complexity, as well as “sensible changes” to adviser education standards that recognise specialisation and scale.
The core elements of Rice Warner’s plan to fix financial advice remain the same as in the group’s August Future of Advice report, which was sponsored by the Financial Services Council and delivered as a bona fide Statement of Advice (Rice Warner holds its own AFSL).
The group again calls for better advice definitions, with a separation between ‘simple’ and ‘complex’ personal advice that would put less complicated issues for “average family consumers” like debt consolidation, budgeting and life insurance advice in a cheaper bucket than more complex, risker issues.
There is also a call for more emphasis on ‘event-based’ advice at the expense of advice “delivered on a retainer basis”, and a stinging rebuke of an education mandate that doesn’t account for specialisation.
“People who are well trained in specific, limited disciplines can deliver a service that is at least as professional as that delivered by those with more comprehensive training,” the submission states. “A similar approach is needed for financial advice.”
Also reiterated is the call for steady-state retirement advice or “counselling” to be considered outside the scope of financial advice and delivered “using a call centre and online tools”.
There is a need for proper process, Rice Warner says, but “the industry is now strangled with red tape and uncertainty”.
At ASIC’s feet
None of the recommendations verge significantly from the blueprint Rice Warner laid out in its original report for the FSC, but there are a few unexplained omissions.
The proposal for call centres and online tools was originally put forward as a delivery method for all forms of ‘simple’ advice, whereas the submission only mentions it in the context of people who are already retired. There is also no mention of Best Interests Duty, which the original report suggested could be watered down for simple advice providers.
There are other differences – the submission is a much shorter document than the report – yet both documents follow the same track.
The new format, however – a formal submission to the corporate regulator – is likely to give it more weight than its original guise as a report commissioned by an industry association.
At the least, it puts the Rice Warner proposals at the feet of the corporate regulator and articulates a question ASIC will now need to consider: Is tweaking advice around the edges enough or should the compliance regime, definitions and method of delivery be completely reformed?
Rice Warner has runs on the board with ASIC after being commissioned to provide data and proposals on self-managed superannuation funds in 2013 – a report which was subsequently updated at the request of the Self-Managed Superannuation Fund Association in 2020.
Good in theory
When the original Rice Warner report was delivered last year the response from industry was mixed.
In a session held at the FSC’s Advice Summit to discuss the proposal in October, Financial Planning Association CEO Dante De Gori expressed support for the proposal and agreed with the concept of splitting advice definitions but said the idea should be treated with caution.
“This issue of simple versus complex… in theory it makes a lot of sense but in practice its quite difficult and complex,” the FPA chief said.
Clients may present what appears to be a ‘simple’ advice need, De Gori explained, such as the need for help with superannuation contributions, but there may be more complex issues behind that. “Symptoms alone aren’t enough to identify a simple advice issue,” he said.