The Financial Services Council has hit back at critics of its recent whitepaper on financial advice, citing the need to move forward and bring the industry together in readiness for next year’s governmental Quality of Financial Advice Review.
After an opinion piece was published last week accusing the FSC of being “disingenuous” in mapping the future for advisers given its primary role as a representative of product providers, the council took the high road in a note sent to Professional Planner.
“Relitigating old debates will not reform the industry, but collaboration that generates clear, evidence-based solutions will,” an FSC representative stated.
The opinion piece, Reform by gaslight: Why the FSC’s Plan for advice doesn’t stack up, penned by compliance group Assured Support director Sean Graham, said that while the FSC’s plan is “not entirely without merit”, the core issue of over-regulation “was caused by, or was a response to, its members’ own acts or omissions”.
It’s ironic, Graham added, that a group whose members “railed against the uncertainty and complexity of principles-based regulation, and lobbied for carve-outs and prescription, now complain about the situation they midwifed into being”.
The call of hypocrisy was echoed by other advice groups including Synchron, whose director Don Trapnell said that while many of the proposals make sense, the council has a history of undermining advice – a charge he linked to the FSC’s support of the Life Insurance Framework laws. “Why should we trust the FSC?” Trapnell said.
Looking at the past will get us nowhere, the FSC responded.
“The broader industry can’t agree on every detail but does agree on the fundamentals – complexity and cost is ultimately being driven by an incoherent regulatory framework progressively added to over several decades – this must change.”
While acknowledging its members role in the events leading to the Hayne royal commission, the FSC representative said the industry’s regulatory jam is about more than historical misconduct, with constant and increasingly repressive rule changes inhibiting the delivery of advice.
“Legislative and regulatory change over the past 20 years has ultimately compounded the complexity, cost and undermining the economics of the sector – it is not simply the result of misconduct from one part of the sector.”
This regulatory oppression is forcing advice teams to take an overly conservative approach, the FSC said.
“Risk aversion and caution is the result of contradictory existing laws and regulation – long before the royal commission – as well as a lack of consistent enforcement by the regulator. It is not some form of conspiracy from licensees or advisers. The fact many businesses continue to operate in such an uncertain regulatory environment is remarkable in itself.”
Reform channels
Released in October, the FSC’s blueprint for advice proposed a number of reforms designed to save an “unprofitable” advice industry, including the abolition of the safe harbour steps, which it argued have essentially been made redundant by the Code of Ethics.
The plan also called for a rewrite of several Standards in the code – one of which, Standard 3, is now in train – as well as a rework of strict new breach reporting rules.
While the methodolgy used in the KPMG report underpinning the FSC’s white paper has been questioned, the response from industry was largely positive. The Financial Planning Association “broadly welcomed” the white paper while the Association of Financial Advisers said it was a “good contribution” to the process of reform.
On social media several commentators questioned why it took the representative of product providers, rather than these associations that represent advisers, to put a comprehensive plan for advice forward in the lead up to the Quality of Advice Review.
In a further twist, less than a fortnight after the white paper was released, FSC chief executive Sally Loane announced her resignation. A replacement for Loane has not been announced.
