The cost of regulation risks strangling small financial advice firms in circumstances where, in the near future one piece of personal financial advice will be regulated by seven regulators, according to the Financial Planning Association (FPA).
In doing so, the FPA has directly questioned whether the Government should weigh the costs of having a single, monopolistic financial services regulator over those of having a multiplicity of regulatory bodies.
The FPA has used its submission to the Productivity Commission (PC) inquiry into competition in the Australian financial system to point out that those seven regulators – the Australian Securities and Investments Commission (ASIC), the Tax Practitioners Board (TPB), AUSTRAC, Information Officer (Privacy), the Australian Prudential Regulation Authority (APRA), the Australian Taxation Office (ATO), and the new Financial Adviser Standards and Ethics Authority (FASEA) – were all administering acts and regulatory requirements using different language and imposing different compliance requirements on financial planners.
“In addition, the same piece of advice will have oversight and interpretation by the courts, the new Australian Financial Complaints Authority (AFCA), Australian financial service licensees and professional bodies such as the Financial Planning Association,” it said.
The FPA said this created a significant risk that the regulatory and compliance requirements under one act and regulator might differ to those of others, leaving financial planners at risk of breaching one regulation in order to meet the requirements of another set of regulatory requirements.
“Financial planners must interpret how each different set of regulatory requirements for each different regulator differ from other regulators to ensure they do not inadvertently breach requirements,” the submission said. “This has a significant impact on costs and efficiencies, particularly on small licensees who do not usually have the in-house expertise or economies of scale to meet the regulatory demands.”
“Given the constant regulatory changes administered by each of these seven regulators, businesses have become paranoid about the plethora of regulatory requirements making them less inclined to invest capital or be innovative,” the FPA submission said.
It said the situation also made it more challenging for consumers to comprehend, trust and engage with the financial system, and understand their rights and the consumer protection mechanisms available to them.