Advisers could be given more leeway to use Records of Advice (RoAs) after ASIC revealed its high-level takeaways from submissions made to its landmark consultation (CP 322) on access to affordable advice.
While ASIC hasn’t yet published the 469 submissions to the consultation, it has provided a “high level” briefing to industry associations and Treasury which was published Monday after being requested by Liberal MP Bert van Manen during a March 19 PJC hearing.
The most significant takeaway ASIC identified across the submissions was that advisers want to use more RoAs, yet remain constrained by licensee and regulatory restrictions.
“SOAs are a clear cost barrier to providing limited advice,” ASIC stated in its takeaway document. “Respondents have raised that Government should reconsider the SoA requirements and expand the situations when an RoA is permissible instead of an SoA.”
As well as providing further guidance on RoAs to advisers, ASIC said it was considering “possible relief to extend the situations where an RoA can be used, for example when providing limited advice or strategic advice”.
ASIC first indicated its intention to provide regulatory relief via an expanded RoA regime during the early days of the pandemic, when it allowed advisers to give advice on the early access to superannuation scheme under an RoA.
The regulator is now set to both increase the quantum of scenarios whereby RoAs can be used, as well as provide further guidance on existing scenarios.
“Respondents want more guidance on providing RoAs and have generally submitted they would like to see ASIC promote its use,” the regulator noted.
Continuing ASIC’s new self-reflective tone and its willingness to consult with industry, Commissioner Danielle Press revealed the regulator is aware that it’s guidance is often too complicated and unwieldy.
“We’ve identified a number of problems, particularly in the way our guidance is structured and set,” Press told Van Manen during the March hearing.
“We think there are some solutions to them, but we would like to talk to the industry about whether that is helpful or not,” the Commissioner continued. “There is a lot of guidance that is quite complex, long and turgid in this industry.”
ASIC is considering shorter examples, shorter guidance and the use of podcasts and video rather than compliance teams to explain regulation to advisers, Press explained. “We think that’s a really important shift in the way we’re thinking about the way we’re regulating the industry.”
The response from industry to the consultation played a key part in this development; respondents said Regulatory Guide 244 on limited advice was “difficult for users to understand”, ASIC noted, while RG 90 on SoAs was “not sufficiently helpful”.
Licensees’ second warning
Among the other observations noted by ASIC was that overly conservative licensees continue to put up barriers to limited and strategic-only advice, a problem Press also highlighted at the Professional Planner Best Practice Forum in August 2020.
While acknowledging this was a business decision, ASIC said it intended to address the issue with licensees.
ASIC also reported the majority of respondents to the consultation were content to use the term ‘limited’, rather than ‘scaled’ or ‘episodic’ advice.
Several policy issues were raised during the consultation that ASIC said it would pass onto government, including a complaint that the FASEA Code of Ethics precludes limited advice.
Another key finding was the reluctance of advisers to embrace digital advice. “There is very little appetite for digital advice among existing advisers,” ASIC stated, adding that advisers did see potential for technology supporting the advice process.
Outsized adviser contribution
Of the 469 submissions to the consultation ASIC reported 244 came from financial advisers, 72 from respondents who were both an adviser and a licensee, 43 from licensees, 17 from industry associations, eight from super funds, two from insurers and two from academics.
The large adviser cohort made a combined plea for the regulator to “talk directly to advisers, not just licensees, professional associations and lobbyists”.
Further, respondents said ASIC should “consumer test” guidance to make sure that it’s “understood and useful”.
The volume of responses seems to have pushed back the consultation process timeline; while ASIC’s website says the industry roundtables to discuss the submissions would take place in Q1, it’s understood these are scheduled to take place next week.
ASIC is expected to release a short update focussing on key issues shortly thereafter.