The efficiency of the financial advice sector has been undermined by the Australian Securities and Investments Commission’s (ASIC’s) approach to its so-called “Best Interests Duty Uplift project” and may ultimately serve to undermine the accessibility and affordability of financial advice.
That is the assessment of the Association of Financial Advisers (AFA) which has used a submission to the Financial Services Reform Taskforce review of Mortgage Broker Best Interests Duty and Remuneration Reforms to argue that the best interest duty has proved highly problematic for advisers and will likely be the same for mortgage brokers.
However, the AFA has been particularly critical of the impact of ASIC’s Report 515 (Best Interests Duty Uplift) project under which all the large institutionally owned licensees were required to appoint an external expert to assess 100 client files as at September, 2019.
The AFA argues that the project has served to bog down financial advice businesses with the result that costs have escalated.
“As part of this project, these licensees were required to upgrade their standards and to deliver further training. The implementation of this project has had a huge impact on these licensees, with the introduction of extensive checklists and all advisers being put on advice document pre-vet requirements, where all files need to be reviewed by a third party before being issued to clients,” the submission said. “This has also had a huge impact for financial advice clients, with the issue of Statements of Advice (SOAs) often taking three to four months.”
“It has also significantly reduced the amount of advice that is being provided and significantly increased the cost of the provision of financial advice,” the AFA submission said.
“Little has been said publicly about this project, however it is very clear that it is having a huge impact on the efficiency of the financial advice sector and ultimately will mean that financial advice will no longer be accessible or affordable for everyday Australians.
“In our view, the financial advice experience with the Best Interests Duty is a stark warning for the mortgage broker sector that this will have a huge impact and that it will result in a significant increase in costs. The implementation of a Best Interests Duty for mortgage brokers needs to be carefully worked through, and the implications diligently assessed.”