Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
Funding model, wholesale test lead FPA’s election platform
The Financial Planning Association (FPA) has outlined its policy platform, or target areas for the next Federal Government. The industry body plays an important role in lobbying for change, highlighting that it does not wish to pre-empt the potential results of the Quality of Advice Review or the ALRC’s review of the Corporations Action, rather, for the May 2022 Federal Election it is focusing on 11 key areas.
Despite welcoming the freezing of ASIC Levy Fees for two years, the group has called for a “Treasury-led review to report prior to the expiration of the freeze”. A key reason behind this has been the fact that the financial planning industry is funding cases and disciplinary action against both registered financial planners and unlicensed groups, something described as incongruous.
The sophisticated and wholesale client tests relied upon by legions of advisory firms, but also a growing cohort of direct-to-consumer products, have also been targeted. “We believe the law should be changed to revise the test for a ‘sophisticated investor’ by increasing the dollar-value threshold to an appropriate and contemporary level, providing a method for indexation and introducing a financial capability measure,” says the FPA.
Further, it is recommending that advisers be expected to provide wholesale clients with a regular warning of the consumer protections they are giving up.
The group has been outspoken on the dangers of unlicensed ‘finfluencers’ effectively operating under a two-tiered regulation system compared to the financial planning industry. “We are calling for the regulators to take all available actions to ensure Australians only act on the advice of licensed, qualified and professional financial planners,” says the FPA.
There is a growing chorus of advisory bodies that are seeking the ‘Safe Harbour’ steps be removed in light of the introduction of the Code of Ethics, a view shared by the FPA, with the group also committed to evolving the ‘education standards’ in order to allow more experienced advisers to receive some benefit for their years of employment.
The future of financial advice will look much different, and likely much simple, if the FPA’s advice is followed with two key recommendations: the separate of product and advice while essentially removing the provision of financial advice, as opposed to product advice, from the AFSL system.
Perhaps two of the biggest bugbears of the financial advice industry have also been identified, with the association calling for all financial advice to be tax-deductible, in line with the treatment of accounting and other professional fees. Similarly, it is demanding that both the ATO and Centrelink recognise the role of financial advisers within their clients’ lives and provide access to important data and application processes.
