Senator Jane Hume today earmarked the incoming Better Advice Bill to ease the compliance burden of financial advisers, telling AFA members the Bill will streamline the number of oversight bodies and deliver “much needed improvements” to the regulatory framework.
Delivering an address at the Association of Financial Advisers’ national conference Tuesday morning, Hume sympathised with advisers struggling to navigate the current regulatory landscape.
“There are so many oversight bodies in financial advice now I can barely remember them all,” admitted the minister for superannuation, financial services and the digital economy, who also serves as the minister for women’s economic security.
“Between FASEA, ASIC, industry bodies, licensees and the Tax Practitioners Board – they all have different and often competing requirements,” she said.
The Better advice Bill, which has passed through the house of representatives and is currently sitting in the senate, will implement the Hayne royal commission’s recommendation for a single disciplinary body, retire FASEA while extending the adviser exam deadline, and take advisers out from under the regulatory oversight of the Tax Practitioners Board.
“It is the first step in untangling the gordian knot, the first step in cutting red tape for advisers, the first step in making life that little bit easier for each and every one of you,” Hume said.
Over the course of a half-hour monologue, Hume both defended advice reform and sympathised with the market participants navigating it.
Twenty years ago, she said, consumers had “no visibility” over whether an adviser was competent. This created asymmetric information, Hume explained, comparing consumers seeking advice to buyers of used cars who assumed all were only average quality. “You can see the parallels with financial advice,” she said.
The financial adviser standards are an attempt to address this market failure, Hume said, and signal to consumers that the advice being given is in their best interests.
Here, she repeated a common refrain of late – the dangers of ‘finfluencers’ providing unlicensed advice, calling them “one of the biggest risks to the industry”.
“If people appropriate your brand – the financial adviser brand – and pass themselves off as one despite not having done the diligence, and not having the same obligations, then this undermines the brand that is such a crucial signal of quality to consumers,” Hume said.
Hume also hosed down calls for a broadening of market participants to come under the impending Compensation Scheme of Last Resort, noting that the Ramsay Review found 92 per cent of unpaid Financial Ombudsman Service determinations came from the financial advice sector.
“For this reason, the CSLR will not include managed investment schemes, and primarily cover personal advice – with a few extensions to other ‘advice-like’ areas, for example mortgage brokers,” she said.
New advice hub
Following Hume’s session, new ASIC chair Joe Longo said a lot of the hard work had already been done in lifting the industry up to the standard it needed to rise to.
“In many ways the heavy lifting is behind you,” Longo said, adding that the lines of communication between industry and regulators “must remain open” to accommodate further change.
Longo also revealed a financial advice hub site is being developed by the regulator, which will presumably bolt on to the existing ASIC website and provide greater clarity on compliance guardrails.
“We’re hoping to consolidate and centralise all financial advice related content on a new dedicated financial advice webpage,” Longo said.
“I think it’s quite important that we try and improve the practical guidance and examples we give around records of advice and the same applies to providing compliant limited advice… this is an area where the industry and advisers can occasionally take an unduly conservative approach.”
In an earlier session, New Zealander Helen Morgan-Banda gave her first public address as new chief executive of the AFA, drawing on the life of fellow kiwi and explorer Sir Edmund Hillary and highlighting issues with the supply side of advice.
“There are less advisers when there is a desperate need for more,” she said.