Calls have been made for Australia’s advice industry to follow the UK’s regulatory model of regulating relevant and non-relevant providers separately.
The joint submission to the Quality of Advice Review from consulting firms Encore Advisory, Finura Group and Tangelo Advice Consulting has argued consumers having widely dissimilar experiences of receiving advice from relevant providers versus limited scope advice through a super fund, with less regulatory requirements, isn’t a good outcome for consumers.
Instead, the submission argued it would be better to simplify personal advice requirements so both are playing on a level playing field and financial institutions could instead focus on a narrower range of advice areas, like contribution advice to a client’s existing super fund.
Tangelo Advice Consulting principal consultant Conrad Travers tells Professional Planner it’s important to have a fair playing field between relevant and non-relevant providers.
“Similar, to the UK where you could have clear labelling,” he says. “If a client knew they were going to one of these providers they knew exactly what they were getting.”
Encore Advisory executive chair Tom Reddacliff says the UK model clearly delineates between restricted advisers and independent advisers.
“It’s the concept of making it clear to the client what model they’re engaging with and where it is the restricted model or the independent model.”
Increasing the flow
Reddacliff says an appropriate regulatory environment would be able to follow suit giving independent guard rails for each model to operate under.
“The [holistic advice] model should be under a best interest duty, but it’s also making sure that what the restricted model has is fair and proportionate and not massively different.”
Finura Group joint-managing director Peter Worn says that nuance will help advisers who are feeling hard done by from the changes.
“If we get that clarification right and the government educates the consumer on the different types of advice models it will elevate the perceived role they do in the eyes in the consumer.”
Reddacliff says not implementing a restricted advice service like the UK has will limit the supply of advice.
“That’s not a good client outcome either. Too often in the industry we don’t start with the client and this is an opportunity to start with the client and work out how they want to engage with these services.”
No brainer
Finura Group, Encore Advisory and Tangelo Advice Consulting spent the last few years talking with each other about improving the regulatory environment. The three companies wanted to leverage their differing perspectives to combine forces into a unified submission.
Tangelo Consulting covers an operation compliance perspective, Finura Group offers the technology point of view and Encore Advisory consults on business coaching and practice management.
Travers say the review has been overwhelmingly positive and praised review lead Michelle Levy for how she has handled the process.
“It’s a gamechanger in terms of setting up a principles basis for the legislation and then having the industry determine its own path towards professionalization around the guard rails. Architecturally, people have missed that point that [the regulations] will step back and treat you as a profession. It’s up to you to determine what that looks like.”
He added there’s plenty of “no brainer” reforms that can be changed, including streamlining fee disclosure statements/fee consent forms as well as ditching statements of advice which have been among Levy’s recommendations.
“All that makes sense and we should just do it,” Travers says.
Drawing on his experience in the account industry where he also consults, Reddacliff noted they have an easier regulatory regime despite the potential liability of millions of dollars for business owners.
“When they’re documenting their advice to the client, rather than listing every single thing they considered in their head in a massive document, all they end up doing is summarising the conclusion. Rather than get advice documents all together, why can’t we have something like that?”
