The Financial Services Council (FSC) has canvassed greater use of scalable advice not constrained by the requirement for a Statement of Advice (SOA).
In a column written by FSC policy manager, Zach Castles, to be published in Money Management, the FSC has made clear its proposal for a two-year trial of the scalable advice arrangement which would only require a less costly Record of Advice (ROA).
Castles is canvassing the use of scaled advice as the FSC’s way of helping overcome growing adviser departures from the industry.
“While no sector in the Australian economy has been spared as the downturn bites, the truth for the financial advice industry is that adviser departures were in train well before COVID-19,” he said. “The industry continues to buckle under spiralling compliance costs and rules for which the true impact has not really been quantified except for one stark projection: just 16,000 financial advisers could be left in the industry by Christmas next year.
“The FSC wants to make first time engagements less costly. A key proposal in the FSC’s Accelerating Australia’s Economic Recovery report, is a two-year trial to make it easier to access scalable advice and less costly for businesses to provide it. Scalable advice would be documented through a Record of Advice (ROA) allowing clients to seek advice on a specific subject.
“Despite an expectation to be concise and clear, SOAs are unwieldy and often almost incomprehensible because of the legal detail. They require a substantial amount of research and in-depth fact-finds about the client as a legal requirement, the level of which offers the most value for developing strategies that service complex client needs and objectives.
“This is again at considerable cost to the consumer for single-issue and in many instances first-time financial advice. Further reams of paperwork are also provided to clients in the form of the Financial Services Guide and contractual agreements. By contrast, an ROA is shorter and less formal, less costly to produce and usually provided to existing clients to confirm changes to the implementation of advice recommendations.
“Such a proposal would still see consumers protected with more flexible access to world-class financial products and advice. It is a pathway to reduce the unnecessary cost, duplication and paperwork now blockading the advice system and pricing consumes out of meeting advice needs,” Castles wrote.
He said that critical to the FSC’s proposal was that it be monitored and the industry work with regulators and Government to demonstrate where it added value so that it could be refined in the interests of consumers over time.
