Amongst the broadly positive response to the content of the Financial Service Council’s recent whitepaper on the future of advice, one question echoed around the advice community: should the representative group of product providers really be the ones sketching a blueprint for advice reform?
Moreover, advisers asked, why aren’t the advice associations doing this in the lead up to the Quality of Advice review?
Perhaps lost in the mire of 2021 was that the Financial Planning Association had actually released its five-year plan back in June 2020, and presented with it most of the key recommendations made in the FSC’s whitepaper.
One of those overlapping proposals, which made headlines when the FPA released it 18 months ago, was that the individual registration of advisers was both a necessary and inevitable alternative to the current licensing system which places the ultimate responsibility for an advisers’ action in the hands of another.
Since then, the Australian Law Reform Commission has made it clear that pulling Chapter 7 out of the Corporations Act, which would pave the way for individual registration, is very much on the table. And the licensees who bristled at the FPA’s prognostication have started hedging their bets on a broader palette of models involving service-only propositions and advice practice equity to future-proof their businesses.
“There was a lot of controversy when we made the call but most of the licensees and the individuals pushing back on us… their messaging has changed over the last 18 months,” recalls Ben Marshan, the FPA’s head of policy, strategy and innovation.
Marshan maintains individual licensing is getting closer, with the impending requirement for advisers to be individually registered with the industry’s new single disciplinary body another telling step.
“We’re getting to a point where it doesn’t make sense for licensees to license individuals, it’s too much risk for a business,” he says. “But there are a lot things licensees can add to the advice proposition without licensing.”
Blowing the trumpet
Marshan says he can understand the perception that the associations representing advisers aren’t doing enough policy work in the lead up to next year’s Quality of Advice review, especially in light of the FSC’s high-profile whitepaper launch.
The FPA is actually doing more lobbying than ever, he says. They’re just not great at letting everyone know about it.
“This year’s been off the charts in terms of advocacy, but when you’re doing all that it’s hard to constantly reflect back on what we’ve achieved,” he says. “We absolutely need to get better at that. We do with members but whether we’re getting the broader channels right is up for debate.”
In the context of the FSC’s whitepaper, Marshan makes two relevant points. The first is that due to the nature of council’s cohort, they’re a much better resourced group than the FPA. “Compared to the FSC we’re not a big organisation and we don’t have the number of people in advocacy roles they do,” he says.
The other is that they shouldn’t be seen as competitors. Rather, the associations should be – and are – working together with the council to better the industry.
“Ninety-five percent of the recommendations align in both platforms because we all have a shared vision for the future of the profession.”
In an infographic sent to members last week, the FPA showed six of the 19 recommendations from its plan have already been completed, including the consolidation of oversight within the single disciplinary body.
FASEA’s recent consultation on Standard 3 of the Code of Ethics is causing some “ruction”, Marshan says, and will likely make the disciplinary body’s launch a tricky one. But if the eventual wording matches the intent of the code while providing better alignment with the Corporations Act it would be a “fantastic” outcome.
Another policy plank shared with the FSC is the need for an overhaul of the sophisticated investor rules. This is in progress, Marshan reckons, as the association is working with the ALRC “and advocating for terms that will achieve the right outcomes”.
While there remains no confirmed progress on the quest for tax deductibility of upfront advice, Marshan insists this is also in train. “Hopefully it won’t be long before there is positive movement on that,” he says.
Efforts to improve the professional indemnity insurance market are also ongoing, though Marshan notes the campaign is now linked to the association’s joint campaign with other groups to expand the Compensation Scheme of Last Resort to include managed investment schemes.
“You need to fix other issues in financial advice before you get to the CSLR, there are massive problems in the PI market with policies not being fit for purpose,” he says.