With the deadline for fee consent forms looming at the end of the month, Financial Planning Association chief executive Sarah Abood has expressed how the regulation is “driving advisers absolutely insane”.
Speaking at the Professional Planner Licensee Summit in Katoomba, Abood said Australia has the propensity to look to the government for solutions which is less common overseas and a trend to avoid but the advice review presented some exceptions including dealing with fee consent.
“As an industry that is fragmented and this competitive it is hard for industry to allow that to solve the problem on its own. One example is advice fee consent forms. Those regulations are driving advisers absolutely insane right now.”
Abood said every day she would get calls from members in tears because the processing deadline for product providers would not allow for sufficient time.
“They’re about to potentially lose their revenue because they can’t see a way they can get those forms in for 30 June. Every product provider is handling this differently; they all have different deadlines to submit forms or have different requirements in their forms.”
The new rules came into effect last year and require advisers to obtain written consent from clients before they can deduct fees from the client’s account and review ongoing fee arrangements each year.
Transitional rules apply if an ongoing arrangement began before 1 July 2021, but to continue receiving adviser services fees after 30 June 2022 consent forms must be received by then.
Not the same profession it once was
The profession has come a long way in recent years, Abood said, and professionals aren’t regulated in the same way salespeople are.
“We have a strong view that advisers are professionals. We have 40 hours of CPD, an ethics exam and tertiary qualifications in order to practice.”
She compared advice to medical practices and highlighted that a recommendation from a doctor wouldn’t be as scrutinised as advice given by advisers.
“When we go see a doctor we don’t demand a doctor writes down every strategy they considered then make us wait four weeks to get the answer by which time we’ve recovered. We don’t do that because we trust the doctor and rely on their many years of professionalism and knowledge to give the patient the right answer.”
Tech is no solution
Also speaking in the session, Hub24 CEO Andrew Alcock said the best use of technology is to drive efficiency rather than be on the backfoot helping regulations.
“That’s going to lower the cost of advice or hopefully will go back to the consumer. We can make money building compliance solutions, but not a lot; it’s not commercially sensible. Our investment should be building a thriving industry.”
Blackrock head of wealth and banks Chantal Giles had just returned from a trip to the US and said their advice market is five years ahead of where the Australian market is.
“Similar to the Australian landscape the high-net-worth segment is 62 per cent of total advised today. They have the same issue of getting advice to masses and that has been focused on technology.”
The end of AFSLs
The FPA has long campaigned for the dissolution of the AFSL system, including in its Quality of Advice Review submission, and many licensee groups have already seen the writing on the wall by focusing on maximising the value of the services they can provide.
“[Licensing] adds a huge level of risk. If you’re a licensee a high proportion of your costs and the time you’re spending delivering to your advisers is on compliance rather than client outcomes,” Abood said.
Lifespan Financial Planning CEO Eugene Ardino disagreed that eliminating the AFSL system will create better outcomes for the industry.
“Having 17,000 getting their own legal advice on the rules would be very interesting without the AFSL level. I think the lawyers would love that.”