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.
Financial Services Council flags priorities for Advice Review
There is growing pressure on the long-awaited Quality of Advice review to deliver real change to an industry that has been saddled with layer after layer of regulation, compliance and paperwork.
Commentary around the cost of advice highlights an important issue, yet given the level of importance and value that can come from a document as straightforward as a Statement of Advice, the focus seems to be on the wrong area.
Consider for instance that most people will pay as much as $20,000 to a real estate agent upon the sale of their home, but $3,000 or $5,000 fees for financial advice are seen as expensive. This is by no means a dig at the real estate industry, rather a comparison of the rhetoric of affordability.
The issue for most advice practices isn’t the ability to provide advice profitably, at least from what I hear, but rather the ability to advise larger and larger numbers of clients each year. Fee Disclosure Statements, Consents, Target Market Determinations and dealing with multiple platforms requires a significant amount of administrative time.
It is for this reason that most groups are lobbying for the Quality of Advice Review to simplify and reduce these compliance burdens on advisers, freeing up time as a result.
The Financial Services Council has flagged three key changes they would like to see with a particular focus on ensuring the sector is left with “a regulatory framework that empowers consumers to get limited advice on simple and basis issues”.
This more transactional advice is central to the changes proposed which includes the removal of the Safe Harbour steps in the hopes of putting an end to the ‘tick a box’ advice process that restricts advisers from covering off on more simple advice needs.
They also suggest improving the documentation requirements, supporting a “shorter Letter of Advice with obligations that can be scaled up or down in accordance with consumer need and the professional judgement of the adviser”. They highlight the fact that there are “entirely separate disclosure regimes for when you need advice and when your circumstances change despite the fact no advice need is the same.”
Finally, they are calling for all advice to be consolidated into personal advice and general advice, with nothing in between. Ultimately, they expect these changes would work to “untangle a regulatory net making the advice consumers need most, the most difficult to provide.”
