Is Frydenberg’s roadmap leading up a blind alley?

23 August 2019

It is entirely probable that by the end of 2021, financial advice will be the most regulated profession in Australia.

When the Federal Treasurer, Josh Frydenberg, last week announced the Government’s so-called Royal Commission Implementation Roadmap he was not only outlining the order and manner in which the Government would act on the recommendations of the Royal Commission, he was also ensuring that he and the Government were actually being seen to be doing something.

But what the Treasurer and his advisers might have taken the time to do was actually consider the total number of changes and imposts which have been inflicted on the financial advice industry over the past five years, not least those imposed as a result of the Government’s own efforts to avoid actually holding a Royal Commission.

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The list of changes and imposts is long, but encompasses elements such as the Life Insurance Framework, the industry funding of the Australian Securities and Investments Commission (ASIC), the introduction of the Financial Adviser Standards and Ethics Authority (FASEA) regime and, of course, all the elements which devolved out of the Future of Financial Advice changes.

Now, according to Frydenberg’s roadmap, advisers must accommodate (and probably fund) a single disciplinary body alongside their FASEA obligation to subscribe to (and pay for) membership of a code-monitoring authority.

At a time when the Government is talking about cutting red tape and streamlining the operations of the Australian Public Service, it has seen fit to impose layer upon layer on the financial advice sector.

Often, when a Government introduces new legislation, it assesses the regulatory consequences and financial impacts which flow from those changes. It arguably owes it to the financial advice industry to do so with respect to the combined impacts of the Implementation Roadmap, FASEA and its other changes. In short, the Government should be prepared to deliver a regulatory impact assessment.

What needs to be recognised is that the Government’s long list of changes impacting advice and the changes being generally wrought on the industry via the exit of the major banks and the reshaping of AMP Limited will result in making advice less affordable and less accessible for the average consumer.

While it is true that the implementation of digital solutions will go some way towards addressing the consequent advice gap, the reality will be that advice will very likely cost substantially more in 2022 than it did in 2018.

What needs to be understood by financial advisers and the broader financial services industry is that while it has taken just a few, short years to introduce the myriad changes now impacting the delivery of advice it will take many years to see those changes moderated or even removed.

Given the number of scandals which have plagued the advice industry and the testimony heard during the Royal Commission it is easy to justify a level of Government action, but the key to effective policy-making is knowing the difference between useful change and damaging overkill. 

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Spot on Mike. In their attempts to appease the outrage pornographers, the Liberal Party is recklessly over regulating in a way that will ultimately make things worse for consumers. By all means bring in better regulation. But it has to be done at the same time as getting rid of all the bad and duplicate regulation.

There is already a massive culture shift going in the operation of licensee's and advice firms. Many insto organisations are simply closing the doors, the poorly run one's are on the way out. Why not let this play out and then re-assess. The industry has been criticised for lack of self regulation, give it a go!

Advice is sooo expensive to deliver now, let alone with a raft of new changes to further drive up the price.

I once suggested to a very senior ASIC person that they set up a consultative group (along the lines if the NTLG) to consider regulatory outcomes but advise on how to efficiently implement the policy agenda.

Firstly she asked where she would find such people, I suggested placing an ad in money management!! She then asked where they'd find the money to fund the ad's. Idiots running asylum.

Less and less Australians will be able to afford advice going forward. Tech may help some but for many it won't be sufficient nor palatable.

Unfortunately that one's that will benefit most in life changing advice are the marginal customers that will be priced out of the market. Well don't regulators, awesome job.

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