Phoebe Tapley

A possible move to upend the AFSL system by taking Chapter 7 out of the Corporations Act and individually registering advisers has received firm support across the industry yet been shut down by the Stockbrokers and Investment Advisers Association.

In Interim Report A of its Corporations Act review, the ALRC noted potential reforms to the definitions of ‘financial product advice’ and ‘financial service’ could “facilitate, though would not necessitate” more substantive changes to the regulation of financial advice such as individual licensing or registration of financial advisers.

The proposal received support from the CPA Australia, Chartered Accountants ANZ, the Financial Planning Association and the Institute of Public Accountants, but opposition from SIAA (still known as SAFAA at the time of the submission).

The FPA argued in its submission that licensee registration adds an additional layer of cost, oversight and influence over the financial planner in conflict with the professional standards under the code of ethics, while the IPA agreed that most licensing parameters can be covered under the code.

However, the SIAA submission stated if individual licensing is introduced any misconduct would be the responsibility of an individual, which will have no bearing on the reputation of others operating within an AFSL.

“There would therefore be no incentive for others to support a culture promoting ethical and law-abiding practices,” the submission stated. “Issues concerning the availability of PI insurance would also arise in the event individual licensing was introduced.”

The topic is expected to be covered at Professional Planner’s Licensee Summit on 6-7 June where ALRC president Hon. Justice Sarah Derrington will be speaking on the progress of the commission’s review.

Swirling discussion

ALRC senior legal officer Phoebe Tapley tells Professional Planner the technical change of separating the definition of personal advice and financial service could clear the way for future moves down the track of individual registration of advisers.

“That’s something during the consultation process we heard views on, some supportive but some who think that’s not the way to go.”

However, she noted the proposal didn’t receive a lot of submissions because it wasn’t a keen focus of the review.

“It was something we had noted because it does seem to be a discussion that’s swirling around that industry at the moment.”

Independent registration wasn’t alone in getting mixed reviews, with the proposal on the definition of financial product advice – one of the key findings of the first interim report – receiving concerns due to overlap from the concurrent Quality of Advice Review.

“We’ll be following the progress of that review and we have already started engaging discussions with the team who are conducting that review,” Tapley says.

The advice review will wrap up on 16 December, giving almost a year for the ALRC to act on the report’s recommendations before its final report is due on 30 November 2023.

Tapley says the ALRC team has been in preliminary discussions with advice review lead Michelle Levy on co-ordinating information obtained during the consultation process.

Simplifying conduct

One of the proposals from the ALRC’s initial report that received strong support from industry and legal practitioners is the proposal to simplify the existing way to regulate misleading and deceptive conduct by a financial service provider.

“At the moment we have six different provisions, at least, which in various ways prohibit that kind of conduct,” Tapley says.

She added the ALRC proposal aims to consolidate these to make it simple enough to understand when it applies and what the consequences of a breach are.

“We received helpful feedback on how we might need to think about the consequences of consolidating that, in terms of making sure there’s consistency in the penalties for example, and the availability of remedies for consumers.”

A lot more to get through

The ALRC will deliver two interim reports on 30 September 2022 and 25 August 2023 ahead of the final report towards the end of 2023.

The audit of the Act aimed to deliver a more principles-based legislative framework.

Tapley says best practice law reform requires extensive consultation because of the real-life impacts of the financial advice sector the reforms will have.

“For us it’s invaluable to be hearing from those in industry as well as legal practitioners and consumer representatives about what these types of reforms might be for them in practice.”

There’s strong support for the aims of this inquiry, Tapley says, and a recognition there is a need to simplify the existing regulatory framework for financial services.

“We heard that what we have now is not really serving the interests of anyone because there is a strong degree of complexity.”

Feedback about the Act described it as “unnecessary complex”, “duplicative” and “often times impenetrable”.

“Which is a good summary of what we’re dealing with,” Tapley says. “It was helpful for us to know that everyone is on board with the aims of this inquiry.”

One comment on “SIAA challenges individual adviser registration move despite industry support”
  1. Avatar
    Jeremy Wright

    If we could look at this from an Advice Practice and Adviser perspective first, this could be helpful.

    What concerns many Advisers and Advice Practice owners, is that if the larger Businesses that have substantial financial resources and technical expertise in compliance and all the Regulatory requirements, are wanting to walk away from this, then what chance will a small practice have, especially when there are numerous interpretations and opinions from all parties as to what is, or could be, in the best interests of a client and how they progress.

    If the end result of all this work is to make it easier for Advisers to give advice and be 100% responsible, then it needs to be clearer what the risks are.

    The Industry has lost over 11,000 advisers and more are leaving because it is too hard to be in Business now.

    Reducing some elements of compliance, without providing more certainty as to the risks Advisers will face in the brave new world, is not going to make it easier to recruit more Advisers.

    It could make it worse, as there is NIL benefit in making a Business more profitable and less time consuming doing the work today, if it all can be taken off you tomorrow due to a continuing maze of complexity, where you may feel you have done the right thing, though the Regulator disagrees and you end up in endless disputes that could lead to Legal action that will disrupt everything you have worked for and cause major stress, with no security of tenure.

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