If regulators are not clear on how they will enforce principles-based regulations as proposed in the Quality of Advice Review, the industry will fall back to relying on prescriptive processes.

One of Levy’s key recommendations is the for the industry to move to principles-based regulation rather than the current prescriptive system, pejoratively known for its tick-a-box approach.

Speaking at a session on Friday afternoon at the Oreana Financial Services Conference, Insignia Financial chief executive Renato Mota said this transition will be the single biggest challenge for the industry if the proposals go through as suggested in the interim paper.

“The prescription isn’t just the regulation; it’s also the licensees,” Mota said. “As the owner of a number of licensees, that’s because it’s our licence at risk, it’s our reputation, our capital… and we’ve contributed to that.”

Although Insignia is supportive of the proposals, Mota said, a principles-based system requires all stakeholders to be clear on how the system works and to conduct case studies on how it is applied.

“We need agreement – as soon as one piece of that puzzle starts to get prescriptive, the principles will break down and we will revert back to prescription,” Mota said.

“We would welcome the opportunity with regulators and legislators as a licensee with advisers to understand the practicalities of this and get to an agreement we we’re defining principles by the same means otherwise there’s the risk we find ourselves back here.”

Driver of efficiency

Mota said the advice review is giving a much need challenge to the status quo and the proposals improve adviser efficiency.

“There are plenty of recommendations in there that will make it more efficient to provide advice,” Mota said. “I’m confident that advisers, given an extra 20 per cent of time or an extra day in a week, will reinvest and see more clients. It will make advice more accessible.”

Netwealth managing director Matt Heine said the reduction of red tape would drastically improve advice implementation.

“We haven’t done the modelling but if [holistic advisers] are about to see somewhere between 120 clients now… if you move to 180 or 200 clients that’s going to have a significant impact on your business,” Heine said.

AMP CEO Alexis George said it was important for the industry to come together on the final report even if it is not 100 per cent on board with the recommendations.

“We haven’t seen the final report yet but any one of us would not agree to certain elements of that draft,” George said.