There are few sectors as closely regulated and levied as financial planning. So much so, that as the Government moves in line with the Royal Commission recommendations to implement a single disciplinary body, it should consider what regulatory requirements have become redundant and should be consolidated or removed.
The Australian Securities and Investments Commission’s (ASIC’s) recent announcement of its expected levy increases in 2020/21 around its industry cost-recovery regime prompted the Financial Planning Association (FPA) to accuse the regulator of price gouging, but the reality is that the ASIC levies are just one line item on the regulatory invoices that advisers are being made to pay.
As well as meeting ASIC’s demands, advisers must also look to the cost of running the Australian Financial Complaints Authority (AFCA) and the Tax Practitioners Board (TPB) and it seems almost inevitable that they will be similarly levied to pay for the cost of running the Financial Adviser Standards and Ethics Authority (FASEA) and in all likelihood the proposed compensation scheme of last resort.
In short, if the Government is serious about having an efficient and effective regulatory regime to cover a professional financial planning sector then it must consolidate the regulatory regime within which advisers are being asked to operate to make it more affordable and the implementation of a single disciplinary body represents the opportunity for this to occur.
In circumstances where the forward funding arrangements for the FASEA are largely in limbo because of the exit of the four major banks from wealth management, it makes sense for the Government to consider whether it can be justified remaining as a stand-alone body when a single disciplinary body will arguably overlap many of its functions.
What is more, consolidating FASEA’s functions within the structure of a single disciplinary body would allow the Government to move forward with its objective of professionalising the financial planning industry via adviser registrations at the same time as leaving much of FASEA’s chequered history in the past.
Where the issue of a compensation scheme of last resort is concerned, the Government would do well to also conduct a thorough review of the professional indemnity (PI) insurance regime in circumstances where it has become increasingly expensive and problematic. Somewhat ironically but hardly surprisingly the layers of regulation imposed on financial planning practices have served to drive significant PI premium increases.
Poorly thought through policy announcements such as allowing AFCA to look back over a decade have only served to drive up PI premiums as insurers, hardly surprisingly, consider the dangers of a external dispute resolution provider seeking to deal in 2020 with complaints relating to events in a pre-Future of Financial Advice (FoFA) world.
The bottom line is that financial advisers, either rightly or wrongly, have been the subject of a patchwork of regulatory efforts driven by Governments looking to impose quick fixes and with little regard to the overall shape and texture of the industry.
That must stop. Thousands of financial advisers are leaving the industry and those that remain must be given a regulatory regime which, while necessarily exacting, is both fair and affordable. The Government must leave quick fixes and sloppy legislative drafting in the past.