Planners struggling under regulatory burden says FPA

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.

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“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.




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Great article, great points here. We are being swamped with compliance and legislation.
To make a real difference to consumers, the regulations and compliance need to make sense, not be over the top and incredibly costly. Thank you to the FPA for raising this so eloquently.

yep -agree. Retail consumers just find the whole process confusing and difficult to understand. So they switch off resulting in poor outcomes for them. Also "rogues" are given a free competitive advantage, because they are able to present a clear simple convincing (bad) solution, while real advice is perceived as cumbersome, complicated, expensive and bureaucratic.

In the name of the provision of quality and compliant financial advice, this industry is littered with too many people with their own agenda's and far too many snouts in the trough making out they are " fixing" a problem that in the vast majority of cases does not exist. Many of these people are on the gravy train for self promotion and kudos, rather than necessarily thinking smart and practically.
It is literally drowning in a sea of over regulation that is killing the effectiveness of small practices to engage with their clients more openly due to an over-burdened focus on compliance minutiae.
The Government has completely over-reacted to past failures of surveillance such as Storm, where it was the inappropriate gearing of investments approved by banks in the name of outright greed that was the root cause of the strategy failures and ever since, every planner and adviser in Australia has hammered by an over compensation for those failings.
It is killing the financial planning business with complexity and confusion and it is suffocating in red tape.

Get used to it, it's only going to get worse if Shorten gets in. I have an email from Shorten where he suggests a constituent considers suing his financial adviser as a way of recouping advice fees and poor product performance.

Once he is in power strap yourselves in folks, we are in for a bumpy ride, no matter how compliant you are.

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