The Financial Advice Association of Australia still believes in the goal of the profession self-regulating, but an independent body will need be created with help from the rest of the industry.
Noting comments made at the Professional Planner Advice Policy Summit on the path to self-regulation Abood said while the association still believes in the goal of the profession self-regulating, it will require an independent body that will need be created with help from the rest of the industry.
“The point I was making in the event…was about self-regulation and the need for the profession to step up and self-regulate,” Abood said at the Melbourne leg of the FAAA Roadshow on Thursday morning.
“My point is that’s not just the FAAA. We’re absolutely an important part of that, we absolutely intend to be a leading voice in the profession, moving to the next stage of professionalism.
“But my point is it just can’t be us, this is a broad profession, we have a number of stakeholders that need to come together to make this a reality and that includes our members, it includes associations like ourselves, and it includes government and Treasury right now.”
Abood said there is an argument advice is the newest profession, and the current state is part of that transition.
“The issue I was calling out is that we’re regulated by government and I’m unaware of any other profession where that’s the case,” Abood said.
Abood said while the profession now has an education standard and a Code of Ethics, ASIC still controls discipline via the Financial Services and Credit Panel and the education standard is still run via Treasury.
“If you look at our strategic priorities…you’ll see that our initial step is co-regulation and that would involve us in being a much greater body, a decision maker on the FSCP and the Treasury standards function and then over time then taking all those functions inside the profession,” Abood said.
Instead, Abood said she envisions the profession being led by a professional body similar to the Australian Health Practitioner Regulation Agency.
“That authorises medical professionals, it sets the standards that you need to follow if you’re a nurse or a doctor or something of that nature,” Abood said.
“It also runs discipline. If someone complains about a medical professional, that’s the body that investigates and makes a decision whether that person can still practice, and it runs standards.”
Abood said the membership body has a “strong” discipline function but notes an adviser banned by the association doesn’t stop them continuing to be a licensed adviser.
“If you’re banned by the FAAA you can still practice. It’s inconsistent with being a voluntary membership body that we would be the only regulator of advice.”
Tranches and classes
Reflecting on the potential wins for the advice profession in the past year, Abood cited the changes that give ministerial power to mandate a universal fee consent form as part of the Tranche 1 Delivering Better Financial Outcomes legislation, although the current minister is yet to utilise it.
“We were able to get a commitment from the minister that he can mandate the form. We want him to actually deliver on that commitment which hasn’t been done yet, but nevertheless the ability for the minister to do that in the law was a big win for us,” Abood said.
“Our members made it clear that advice fee consent is incredibly really irritating right now.”
With a federal election due soon, the association doesn’t expect to see Tranche 2 draft legislation until August if nothing is announced by the current government before an election is called.
Minister for Financial Services Stephen Jones announced his clearest policy intent yet for Tranche 2 towards the end of last year, which gave firmer boundaries on what the “new class of adviser”, the new second tier of adviser, will be able to do which is mostly around advising on APRA-regulated products.
Abood said advice firms being able to employ the new class of adviser is an important concession from the government as well as that firms can charge for the services they provide.
“That was quite contested behind the scenes but I’m really pleased that we’re able to deliver that,” Abood said.
“Not every member is going to want to do it but the fact that you can puts us on a more level playing field with those institutions that can collectively charge.”
Abood maintained the association’s position that they don’t want the official name for the new class of adviser to include the term “adviser”.
Super divergence
Abood said a key learning through the DBFO consultation process – which included the superannuation sector – was the divergence of business models and the reality that they are now in competition with others for members and the services of advisers.
“In the last few years they’ve all opened up to the general public so they’re all public offer funds now,” Abood said.
“That means they’re competing with each other, not just with the retail sector. Those profit-to-member were not all saying the same things to government and Treasury during those consultations, many of those funds have different models when it comes to advice.”
These models are from funds that employ their own financial planners, have referral partnerships with the FAAA, rely on intrafund advisers, or use an outsourced partner like Industry Fund Services.
Abood said that divergence of views has taken time for Treasury to reconcile when working on drafting the DBFO legislation.
“These models are divergent and as you’d expected they will be advocating to promote the models that they’ve chosen as being best for their members,” Abood said.
