Caroline Cai from Pzena Investment Management speaks to The Inside Network’s James Dunn for our IN60 series. The Inside Adviser
The historic outperformance of big tech stocks in the US may look like a global outlier, but many developed markets (including ours) have high levels of concentration risk. That may not be the case for long, with a likely softening interest rate environment set to re-order indexes around the world.
FPA flags tax deductibility and removing duplication in QAR submission
The day-to-day life of a financial adviser could soon be a lot easier, after the Financial Planning Association of Australia (FPA) called for an urgent investigation to address “the quagmire that has been created by complex, overlapping and contradictory regulations, codes and rules that now govern the provision of financial advice.”
Recommendations from the Hayne Royal Commission missed the chance to professionalise financial planners and instead transformed the industry into an expensive and highly complex profession. This was the unintended consequence of authorities trying to protect people; it made the process so onerous that the cost of delivering advice has become too expensive and too cumbersome for a financial adviser. The level of compliance and unnecessary complexity that financial advisers now face has been a huge detriment to the industry, causing the mass exodus of financial planners who have simply given up.
Sarah Abood, CEO of the FPA, said “Just one of many examples is ongoing fee disclosure requirements. While markets are shaky and inflation spiking, many planners are having to drop everything to get multiple sets of forms signed by their clients before 30th June to re-authorise their ongoing fees.
“These fees have already been disclosed and approved up to seven times in the past 12 months. It’s inconvenient and confusing for clients, it’s costly for planners, and it’s got to stop.” The FPA is proposing that the regulator remove duplication across these various forms and have a “single source of truth.” Further, it proposes to separate the advice documentation and compliance requirements into separate documents to make advice easier to understand.
The FPA has endorsed five key themes that it says are integral to improving the affordability and accessibility of quality financial advisers for consumers. They are:
- Recognising the professionalism of financial planners
- Addressing the needs of clients, including easier-to-understand documentation
- Achieving regulatory certainty
- Improving sustainability of profession and practices
- Facilitating open data and innovation
Another key recommendation of the submission is the immediate tax-deductibility of all financial advice, not just ongoing fees, in order to better align it with other professions.
Abood highlights the fact that a simplified regulatory regime is needed, one that removes complexity and eliminates duplication for financial advisers, omits unnecessary regulatory conflicts, and gets rid of uncertainty.
“To continue delivering services to clients, planning practices must be financially sustainable, and we need to turn around the current decline in planner numbers,” Abood says. “Our profession must be investible, insurable, and attractive to new entrants.”
At present, she says, there is a lack of access to data which is creating inefficiencies, rising costs and adding unnecessary red tape to the financial advice process to a detriment to clients. Abood concludes by saying: “Financial planning is a profession that is critically important to the financial futures of Australians. We urgently need to make sensible changes that will ensure consumer protections are preserved, and also ensure that a thriving community of professional financial planners is available to deliver high-quality advice at a more affordable price in future.”
