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.
Put client consent on hold for three years: AFA
June 10 was the closing date of what may well become the most important review of the financial advice industry in its short history. While the Royal Commission had the most impact, for better or worse, on the industry, the Quality of Advice Review stands out as an opportunity to pause and give real consideration to this highly regulated industry and to seek to learn from other global jurisdictions.
With as many as 15 associations seeking to represent the “voice” of the financial advice industry, the messages have been wide and varied, but among those offering the most clarity was that of the Association of Financial Advisers (AFA), which released its submission this week.
The AFA acknowledged the “depth of issues in financial advice,” the significant and growing compliance burden and the fact that 40 per cent of the workforce had left the industry in just three and a half years. The ultimate result has been an increase in the cost of advice and “advisers being very selective in terms of which clients they wish to take on” or to retain.
Thanking those members who made a submission, the standout recommendation was the proposed “three-year relief period for client consent forms.” The AFA is concerned, along with many advisers, that the lack of a standard template and requirement to provide each different platform with a different document is a massive burden on the industry.
It ultimatelys hope that a “pause” will allow a standardised industry-wide solution to be constructed in an effort to reduce the cost, likely in the tens of thousands, to financial advice practices. Extending this, the AFA also recommends that the regulator “remove the requirement to report the previous year’s fees” in an Enhanced Fee Disclosure Statement every year, given it is quoted in multiple documents.
Focusing on simplification, it proposes that the regulatory obligations of providing advice “should be proportionate to the level of complexity and risk of client detriment,” while also broadening the use of Records of Advice and suggesting more clarity on the fact-find process when providing scoped advice.
It seems the Safe Harbour provisions may be on their last legs, with the AFA adding to the chorus of recommendations that the box-ticking exercise be removed, or at the very least, the broad “other steps” requirement. Another common bugbear has been the access to client data from government departments, with the recommendation to allow advisers access to the ATO Portal, My Gov and Centrelink sites.
Finally, is a recommendation that upfront life insurance commissions be retained, given the difficulty in charging for such labour-intensive work, but increased to 80 per cent.
