The advice industry would be better served by collaborating to develop its own solutions to current challenges so we can end this unproductive cycle where the Government and the regulator dictates the answers and the industry is left to try and adapt this to the lived experience on the ground.
If we want to change that dynamic, and it seems there are many who do, it is up to all of us (including myself) to shoulder the responsibility and propose better ways of doing things, so we can be more effective at getting an outcome. Then we can take a proactive approach to shaping our industry and spend less time and energy being critical about the changes imposed on us and more time partnering with government to build the future. This can only be a net benefit for consumers.
At the recent AFA conference held on the Gold Coast, I participated in a session on understanding and fixing regulatory uncertainty and licensee caution. The question of whether licensee risk aversion was compounding an already difficult situation was raised as part of this discussion, a timely question in many ways as we now work through the Quality of Advice Review proposals.
My initial response was “well, of course, how could it not be”. We are all aware and have lived experience of the time, effort and dedication required to adapt to the rapidly revising regulatory and compliance obligations in the last few years, and the reality is that this has deeply shaped the experience of our businesses and of us as professionals.
The facts are we spend more time meeting these obligations, taking valuable time away from our clients and building profitable businesses. It is little wonder then that in this highly charged environment, we become overly aware of our actions, checking and double checking so we stay in our lane.
In our own business, we have two full-time staff whose job includes checking Fee Disclosure Statement documents across the network for any breaches. More often than not, mistakes identified are just that, rather than faults in the advice or service. This use of resources is expensive and inefficient, encourages a risk averse culture in both licensees and advisers, but is necessary to ensure all parties meet their legal obligations.
But are these actions making an already challenging operating environment worse? Does uncertainty make our operating environment even more fragile?
For the licensees and advisers we work with, the number one issue for them is not regulatory uncertainty but regulatory complexity. This is because meeting the regulatory and compliance obligations requires systems and processes that must adapt and be applied to the nuances of each client’s situation. With the involvement of multiple competing product and platform provider requirements, nothing is standardised in our industry and duplication of forms is rife.
This infrastructure to manage this complexity has had to be built from scratch. The departure of the large institutions from our industry has left an operating framework that was not suitably equipped to meet new and pre-existing obligations, even with the benefit of scale. Small and large providers have been left scrambling, to assemble the infrastructure they need to operate their businesses in a compliant manner and to deliver advice for their clients.
So it is somewhat frustrating to ask licensees if their actions have made the situation harder, when they have had to adjust to a whole new operating environment without the necessary infrastructure in place to make it any different.
This is where businesses like ours are now collaborating and innovating to transform the industry’s structure and will continue to expand the services provided to licensees and advisers as they rebuild and reset their businesses for the future.
While we are certain to have more change in the industry, and the tabled advice review proposals seem the next likely iteration of those, I was asked a question in the session at the AFA where I thought we had failed in the past and what we could do differently going forward.
As I said at the outset, my response was that the only way to change this dynamic we find ourselves in is to flip the whole way industry regulation is developed on its head. So rather than working with Treasury to try and shape policy after it has been drafted, advisers and licensees need to lead development of the solution, where they write the policy to meet government (and industry) objectives, bringing the benefit of operational experience to forecast and foresee the unintended consequences that others outside our industry cannot.
Nathan Jacobsen is CEO of Diverger.
Nathan is right in his summation of the complexities we all face, though none more than Advice Practices who bear the brunt of all the myriad ways of every Company wanting to do it their way, with their forms and their processes that have never closely looked at it from the perspective of their customers and what it is they need to enable them to quickly and easily work with the Company, then get out and do it again, which dare I say, is the key to growing a successful Business.
Incumbent Businesses that have got by with complexity and have had the size to keep control, their days are numbered.
Nimble players from all over the world, can see the issues and are moving against these Institutions who refuse to listen to their customers, which if they continue, will turn many of these giants into minnows, due to their mantra of, “This is the way we do it,” and a lack of Business and real-world ACUMEN.