Home / Opinion / Affordable advice review offers an opportunity for change

Affordable advice review offers an opportunity for change


Financial advice industry bodies including the SMSF Association (SMSFA), Association of Financial Advisers (AFA), and Financial Planning Association (FPA) have jumped on ASIC’s Affordable Advice review to call for an industry reset. This week the SMSF Association released their submission, with key concerns relating to compliance, both in terms of costs and burdens being applied, particularly by Australian Financial Services Licensees (AFSLs).

According to the SMSF Association, ‘the current regulatory system is failing consumers with an outdated compliance regime, impost from Australian Financial Services Licensees (AFSLs) and the operation of scaled advice the main barriers to providing financial advice that is more accessible, cost-effective and relevant to SMSFs’. The industry group has made 13 recommendations centred around reducing complexity, improving efficiency and ‘driving harmonisation’ across the industry.

In their submission, the SMSFA, led by CEO John Maroney, lists eight factors that are inhibiting a more sustainable, flexible, and cost-effective advice model:

    1. Compliance costs and levies;
    2. Licensees creating a significant extra layer of compliance and costs;
    3. Lack of clarity on how scoped advice can be provided;
    4. Compliance advice documents that are not fit for purpose;
    5. ASIC’s image;
    6. Guidance often not understood or read;
    7. The failure of the limited licence framework; and
    8. A regime that doesn’t support strategic advice.

    An exodus of advisers from the industry, both limited and fully licensed, following the Hayne Royal Commission, combined with reports of ballooning costs for straightforward advice requirements triggered ASICs review. According to the regulator, scaled advice relating to individual strategic or investment matters is allowable under the legislation, but industry participants say this has been complicated by the requirements of FASEAs Code of Ethics. The result has been AFSLs effectively applying significant compliance burden and therefore costs on their advisers and clients.

    Two of the thirteen recommendations proposed by the SMSFA are:

    • Recommendation 3 – ASIC should explore what lessons can be learnt from wholesale clients and the advice process relating to these consumers, where consumers generally have a higher level of financial sophistication and greater access to affordable financial advice.
    • Recommendation 12 – The limited licence framework has failed and should be removed and transitioned to a new consumer centric framework. This may be in the form of a ‘strategic advice’ offering.

    The SMSFA says that the introduction of ‘strategic advice’ could be an integral part in developing a far more consumer-focused financial services regulatory system.

    Commenting further, they say that “the current regulatory system makes it very difficult for SMSF trustees to obtain the limited SMSF advice they require. We believe every effort should be made to implement ideas and changes, even where improvements may be difficult to fit into the existing framework – and strategic advice is central to this.”

    Maroney says the growing interest in strategic advice is because many consumers want this advice rather than advice on specific financial products. Additionally, with comprehensive advice out of reach for many Australians due to cost, it is clear more are seeking piece-by-piece strategic guidance. “With improvements to the way limited advice is offered out of CP 332, strategic advice could be the foundation on which a consumer-focused framework is built”.

    The Inside Adviser

    Iress’ big loss on OneVue deal caps five years of platform bloodletting

    It’s a spectacular transaction, one that marks not only the likely nadir of Iress but what should be the end of five very frothy years of M&A activity in the investment platform space.

    Tahn Sharpe | 26th Feb 2024 | More
    Grumbles over Evidentia deal highlight growing pains in the rise of asset consultant cohort

    An evolutionary leap in the retail investment product landscape is taking place, with asset consultants displacing financial advisers across rich corners of the value chain. Scarcity Partners’ big bet on Evidentia, and how it’s being received, brings into focus just how seismic the shift really is.

    Tahn Sharpe | 8th Feb 2024 | More
    Jones’ advice dilemma: How to foster Holden advice provision in a Rolls Royce industry

    The concept of a ‘qualified adviser’ with less qualifications provoked an industry backlash. While the government has signalled it is open to discussion, the problem remains – how to open up advice to more consumers at a viable cost?

    Nicholas Way | 22nd Jan 2024 | More
  • Popular posts: