InFocus: A joint push for the Quality of Advice Review
The Joint Associations Working Group (JAWG), a collaboration of leading financial services industry associations, has joined forces to push for common goals in a submission to Treasury for the Quality of Advice Review.
Calling for a more consumer-focused regulatory approach, reduced costs, and greater recognition of professional judgement, the joint submission made several key recommendations which this InFocus will unpack.
The 12 organisations in the JAWG were:
- The Association of Financial Advisers (AFA)
- Boutique Financial Planners (BFP)
- Chartered Accountants Australian and New Zealand (CA ANZ)
- Certified Practising Accountant Australia (CPA)
- Financial Planning Association of Australia (FPA)
- Financial Services Council (FSC)
- The Financial Services Institute of Australasia (FINSIA),
- The Institute of Public Accountants
- The Licensee Leadership Forum
- The Self-Managed Superannuation Fund Association
- The Stockbrokers and Investment Advisers Association
- The Advisers Association
The collection of associations broke their joint submission into five key themes or priorities for improving the accessibility, affordability and quality of financial advice for consumers.
These were:
- Consumer focused – putting consumer, customer and client needs first;
- Recognition of professionalism – recognising financial advice as a profession and financial advisers as professionals;
- Regulatory certainty – ensuring the regulation and enforcement of the law are consistent;
- Open data and innovation – standardising and sharing data to remove duplication and reduce rework; and
- Sustainability – ensuring the sustainability of the financial advice profession and practices, with a focus on continuous innovation and improvement.
The intent was to have deliverable actions with outcomes, some in the short term (12 months or less from the final report) and some in the medium to long-term (13+ months).
The group’s submission stated the introduction of the financial planner and financial adviser professional standards which asked financial advisers to become professionals had been a successful development.
“Data from ASIC and AFCA has demonstrated that the combination of reforms such as the Future of Financial Advice (FOFA), Life Insurance Framework (LIF) and the professional standards framework have significantly improved the overall quality, education standards, competency and compliance of financial advisers.”
However, the organisations felt the Government and regulators still appeared to have taken the view that financial advice should remain a highly-regulated environment which relied on black letter law and legislative instruments.
This was despite being viewed by clients as trusted and valued professionals and improvement being demonstrated by decreased complaints.
This was why the group had specifically focused on tackling the complex, inconsistent and costly regulatory environment where licensees and advisers were fearful of making even minor errors.
The submission therefore made several recommendations and observations that included:
- A regulatory regime that supports an advice process aligned to professional judgement and the situations of individual consumers guided by professional standards, as opposed to compliance with prescriptive regulation, has several advantages including lower compliance costs via a risk-weighted approach to advice outcomes, and recognition of the advice sector as a profession.
- The removal of the safe harbour steps from the Corporations Act, and clarity on what is needed to satisfy the Best Interests Duty must be provided.
- Open data and the sustainability of the financial advice sector are key prerequisites to improving access to affordable quality professional advice and encouraging innovation in the sector. There is a significant amount of unnecessary waste in the system that leads to additional cost, time and resource requirements for consumers and advice providers. Much of this waste could be reduced or eliminated through access to up-to-date and reliable data that is already available within the financial services ecosystem.
- A profession-wide position on the tax-deductibility of initial and ongoing advice fees and a review of the ASIC industry funding model are needed.
- Retention of professional standards and education requirements while reviewing the one-size-fits-all education pathway with respect to current and potential advice specialisations and business models.
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