The corporate regulator’s heavy hand is stifling the provision of advice, says experienced adviser Deborah Kent, and while ASIC’s intentions are good the manner in which it regulates the industry is precluding the adviser workforce from effectively doing its job.

Speaking on a panel at the SMSF Association’s National Conference in Adelaide this week, Kent railed against the constant pressure being put on advisers by the regulator.

Regulation is the toughest pain point advisers have to manage, she said, but the regulator is seemingly blind to the damage it’s causing.

“Obviously us advisers know about it [and] licensees know about it,” Kent told the audience during a panel discussion on retirement advice. “Regulators don’t because they don’t understand and they’ll never understand. It doesn’t matter how much we sit in front of them and explain what we do, they just don’t see it that way.”

Kent is the founder and principal at Integra Financial Services in Sydney. She is an ex-director of the Association of Financial Advisers and served as a director at FASEA until its cessation in January.

ASIC’s regulatory work is designed with consumer protection in mind, Kent explained, which is appropriate. But that protectionist view becomes a hindrance if it isn’t holistic, if it doesn’t balance the needs of clients with an efficient, functioning marketplace designed to facilitate advice provision.

“Regulators and government just look at protection of the consumer and I understand that,” she said. “We need to protect the consumer and we need to ensure that the person getting the advice understands the advice they’re getting, that it’s in their best interests and they can happily sign off on it.

“But the problem is we put all these layers of compliance over it, so much protection against the client having a go at the licensee that we’ve just taken it too far, it just keeps getting bigger and bigger and bigger.”

ASIC has indicated an awareness that its regulatory work is hindering advice provision, with its research on access to affordable advice identifying “overhead and fixed costs” as a major contributor to the cost of advice, along with statement of advice preparation and rising governance costs.

Over-regulation is an area set to be tackled at the impending Quality of Advice Review in the back half 2022, while the Australian Law Reform Commission is in the middle of reassessing the “overly complex nature” of the Corporations Act, and may pull Chapter 7 – which deals with financial products and services – out altogether.

Yet the regulator has also pushed back at “conservative” licensees, who ASIC believes put overly restrictive compliance parameters on advisers – especially with regards to scaled advice provision.

That interplay between ASIC, licensees and compliance leaders is suffocating the dwindling adviser workforce, Kent believes.

“I feel that we’re under a lot of pressure,” she said. “I know that the advice community is under a lot of pressure to provide quality advice and then we have compliance people who interpret the rules, and everyone interprets them differently so we have no consistent interpretation.”

Policymakers and regulators need to acknowledge how far the industry has come, she argued, and treat advisers like the trusted professionals consumers see them as.

“Unfortunately the regulators just do not understand that the wealth of knowledge and the intimacy we have with our clients is what gives good advice,” she said. “The problem is the regulators don’t get that, they’re just regulating the crap out of it.”

3 comments on “‘Regulating the crap out of it’: More to advice than consumer protection”
  1. Avatar
    Paul Barrett

    The regulatory settings have swung from the “loose” system in the 80’s, 90’s and 2000’s – to a “tight” system today. This change happened relatively quickly. What is required is a “loosening” of the regulatory systems back to a sensible middle ground where the sector can then attract innovators, capital, and can grow again. When you tighten a system too much all of the energised innovators head for safer, growth-oriented pastures – such as the tech sector, or build companies like Afterpay….

  2. Avatar
    Chris Cornish

    It has nothing to do with trust. ASIC is simply a Big Bloated Bureaucracy and is doing what Big Bloated Bureaucracies do.
    Let’s face it, the Federal Liberal government has given them carte blanche to do whatever they like, grow as big as they like and simply charge financial advisers for whatever costs they incur in this growth. They will continue to expand their operations because this is what Big Bloated Bureaucracies do.
    If the economy grew as quickly as government departments, this country would be perpetually booming.

  3. Avatar
    Jeremy Wright

    Interpretation. That is the one word that has created the unfolding chaos and each side of the argument have their own interpretation, where they debate and ponder and analyze while the Advisers continue to leave, costs rise and more Australians are left to fend for themselves in a very complex and ruthless world that will quickly take and rarely give.

    RISK is the other word that seems a simple concept, hence the vast array of Legal defense, with page after page of legalize in what is in a total misnomer document called a Statement of Advice, though probably should be renamed “The Magna Carta,” as the so called protections, are so complex that no-one can agree on what it all ACTUALLY means and WHO is actually protected.

    Australia has become a Country of talkers and debaters that has reached a point where no decisions can be made without asking for everyone’s opinion and of course, final sign off by the Legal Gate keepers who ARE the cause of this total mayhem.

    This constant talkfest with no progressive action, is economically killing off what should be the greatest Country in the world.

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