Despite two years having passed since the introduction of the Financial Services Reform Act, the majority of advisers still struggle to accept the requirements relating to compliance, which they describe as a massive day-to-day burden, according to the results of a recent Assirt/Wealth Insights survey.
The study revealed that advisers were critical of the regime and felt its original objective of protecting the client had not been achieved.
Asked what the single biggest problem relating to their business was, 59 per cent said issues relating to compliance.
Wealth Insights managing director Vanessa McMahon said many advisers were concerned that a financial planner could adhere to all of the compliance regulations and disclose the appropriate information, yet still deliver bad advice to their client.
“This was the most talked about issue … the fact that the compliance regime does not actually regulate bad advice,” she said.
“Over regulation of the industry has not prevented the unscrupulous from conning the market.”
The survey found that advisers were aware their clients rarely read their Statements of Advice and, even if they did, most would not understand the jargon they were written in.
Many advisers complained compliance reduced the time they had to allocate to more value-add tasks, requiring them to work longer each day or employ extra staff.
As a result, the availability of advice to potential clients with only a small amount to invest has become more difficult and, at times, too expensive to provide.
“The rise in costs has, in many cases, translated into higher fees passed onto the client,” McMahon said.
“Consequently, this has prompted many advisers to focus on clients with larger portfolios, to the detriment of smaller clients.
“While most advisers are not experiencing a margin squeeze, they are experiencing a profit squeeze, as compliance draws them away from client servicing and other more profitable activities.”
The full results of the survey will be released next month.
