But there’s no doubt that when it focused on big licensees ASIC’s actions had a much greater impact, were much more visible, and resulted in higher remediation or compensation figures in total dollar terms.
Press says the regulator views its actions through the prism of preventing harm to the greatest number of individuals possible, “and when you’re thinking about harm, if you’re looking at a licensee – be it medium or large – the harm is more clear, because [the licensee is] harming many, many clients, as opposed to one or two”.
“Unfortunately, the [harm to an individual] is equally as bad, if not often worse, at that very small end. But collectively, if we’re thinking about allocating scarce resources, do I want to protect 100 people, or am I going to protect one person?”
Press says this is the trade-off a regulator considers every single time action is taken.
In a different world the regulator would have the resources to monitor every licensee equally. But even now, the cost of regulation, particularly via the ASIC levy, attracts criticism from those who have to pay it.
“I think the reality is that the system cannot afford the regulator that the system actually thinks it wants,” Press says.
The post-royal commission adviser diaspora and the growth in own-AFSL firms has driven scepticism about the motivations of advisers who might be leaving licensees that hold them to stringent standards of compliance and moving to an environment where they’re out of the spotlight and can, to put it bluntly, get away with sloppy processes or lax advice standards.
Press says “it was a real issue in a small cohort of that small cohort” who obtained their own AFSLs.
“I never thought this as a regulator, and I don’t think it today, that financial advisers generally go to work thinking how am I going to screw my client and how am I going to get away with stuff that’s bad,” Press says.
“I just I just fundamentally don’t believe that that is the majority of the advice space.”
But she concedes that there are some people in the advice who do, even if it is a fraction of all advisers, and it’s a challenge to monitor them if they’re a small licensee, self-licensed.
“Or they’re actually unlicensed, which is even worse,” Press says.
“If they are unlicensed, then where on earth is the protection? At least at least if there’s a license there, there’s AFCA, there’s a Compensation Scheme of Last Resort, there is some form of support. But at an unlicensed level, oh my goodness. It’s fraud, its theft, it’s illegal, but it’s whack-a-mole to try and find it.”
An important piece of recent regulatory reform is the removal of Statements of Advice which will be replaced by advice records as part of the Quality of Advice Review reforms confirmed by the government at the end of last year.
But there was nothing in the law that says an SOA has to be a huge, unwieldy and basically unreadable document. But the countervailing argument is to try and issue clients with a simplified SOA and see where that gets you with ASIC.
“We heard that a lot,” Press says.
“I don’t think I would have done a presentation or [had] a conversation in financial advice without getting to that point of ‘SOAs are broken’. “
Press echoed similar comments to Minister for Financial Services Stephen Jones that SOAs are being used as protection mechanisms rather than client documents.
“Whereas, ASIC would argue – and I think rightly – that if you have good records, your SOA is almost irrelevant because you are going back to the record-keeping,” Press says.
“I would argue that actually what ASIC pings financial advisers on is not the SOA, it’s the record-keeping.”
Press says both are different but get wrapped “in this furore” about whether an SOA is useful or not.
“Depending on, obviously, what the law ultimately gets to, as a regulator, as an advisor, as a client, I actually don’t care what the SOA says,” Press says.
“I just want to make sure my clients are protected and that as a client, I’m protected from the wrong things occurring. I think the problem is that the SOA has become the legal document of choice, if you like, which is actually not helpful.”
Give and take
Press acknowledges there will always be us-and-them tension in a relationship between a regulator and the entities it regulates, but there are ways that relationship can be made to work better if both sides are willing to give a little.
“You can’t please all of the people all the time,” Press says.
“For me, it was about making it better, and improving that outcome, and I think acknowledging that change needed to happen on both sides actually: industry needed to shift, and the regulator needed to shift.”
Press adds she had said publicly when she was commissioner that some of the regulator’s guidance was “horrible”.
“[Even] I didn’t understand it, and I was a practitioner in it,” Press says.
“Particularly in the advice space, there is a recognition that the regulator needed to do better on some of that stuff as well, but the industry also needed to stop just blaming the regulator, because every time there was a problem it was always the regulator’s fault. Well, I’m not sure that’s right.”