The suite of reviews in train aimed at reforming the advice industry will need to prioritise clarifying and simplifying compliance requirements, according to CoreData founder Andrew Inwood, or the ramifications could extend from consumer harm out to the wider economy.
Speaking at the Stockbrokers and Investment Advisers Association Conference in Sydney on Wednesday, Inwood said the advice groups that are surviving at the moment are “tolerating” the current standards, but remain constrained.
“One of the things which they would claim is holding them back is the opacity of what’s required from them at the moment,” Inwood said. “They simply don’t know (what to do), and they don’t know how to do it.”
Uncertainty around the direction of compliance reform, which will be headed by the Australian Law Reform Commission’s review of the Corporations Act and financial services legislation, as well as the Treasury review headed up by Allens partner Michelle Levy, is compounded by a recent change in government and a perceived lack of clear directives, he continued.
“Because they can’t get a clear read on what’s going on and that read is becoming less clear [after] the government has changed, we’re yet to find out what the intentions are,” Inwood said. “Everyone is kind of holding their powder at the moment.”
The research and insights company founder said four of the top six advice groups in the market right now have put money aside to cope with the anticipated change, but are “basically just waiting to see what happens” in the interim.
For those conducting the reviews, and the industry stakeholders preparing submissions, the need to formulate effective reform is high. Not only are consumers at risk, and advice jobs on the line, but the broader economy depends on the responsible allocation of capital that the advice industry facilitates, he explained.
“This cohort in this part of the industry is the bridge between capital and industry. The stored value of the labour of people who work in Australia and how that gets applied to industry fundamentally changes nations.”
If the industry doesn’t get that right, Inwood said, it will create a situation where the money is stored outside the system.
“If you want to see what that looks like go to Japan and see what’s going on there. The money doesn’t go to the market and the market does no good. They’ve been in deflation for 20 years. Unless we can get this right we face a real issue.”
