In September, the Australian Securities and Investments Commision (ASIC) granted a no-action position on fee disclosure statements and renewals for advice businesses in Victoria working under Stage 4 COVID-19 restrictions.
This is the result of joint advocacy by the Financial Services Council (FSC), the Financial Planning Association and the Association of Financial Advisers, stemming from members of our Advice Board Committee sharing their experience of particular hardship in Victoria.
The FSC has welcomed the pragmatic approach taken by ASIC as the sector responds to the needs of consumers during these difficult times.
It’s a small and temporary change that potentially has huge ramifications for the duration of the restrictions. It strikes at deeper issues raging within the massive legislative-compliance net entangling thousands of advice businesses and professionals across Australia.
Advice businesses, like all businesses, plan business activity: from employing or dismissing staff, running at a profit or loss, paying tax and attracting consumers. There is no end date to the uncertainty the pandemic is wreaking on the livelihoods of these businesses, as it is for millions of Australians.
Stage 4 restrictions have made it difficult for advice businesses to comply with what are technical and prescriptive obligations, such as the fee disclosure and renewal obligations the no-action position covers. The temporary closure of schools and daycare centres forces staff to choose essential care responsibilities over performing vital compliance functions within advice businesses to meet these obligations. Travel restrictions and the limited capacity for the use of technology exacerbate the pressure such businesses face, potentially forcing them to close and ultimately deprive consumers of professional advice.
This step from ASIC, and the preceding clarity on electronic renewals announced recently – also the result of advocacy by the FSC and advice associations – will enable advice businesses to conduct their operations with technological or electronic alternatives.
This is vital because millions of Australians are reconsidering their financial positions. Many are accessing their super, or facing redundancy and unemployment, others are entering retirement. Industry has been meeting these needs and adapting their operations to do so.
However, too many consumers are being priced out of receiving critical financial advice when they need it most due to unacceptably high advice costs.
Let’s be clear – regulation is the largest contributor to the cost of advice. On top of this, advice businesses across Australia are fielding emerging challenges as well as old ones. Lockdowns, working from home and escalating pressure on the mental health of the advice profession is occurring as businesses continue to ready compliance systems for the passage of Royal Commission legislation and adapt to other tectonic shifts reimagining the financial advice landscape. These include the transition to open banking, the acceleration of fintech, and the largest proliferation of state assistance to consumers and businesses seen since the Second World War.
All such developments will shape the innovation, expertise and products that deliver quality advice for millions of consumers, and the very issues they need advice on. Many such issues are quite small and simple but are held back by regulations that lack sophistication.
Our consumer protection framework is functioning, but for it to be sustainable it must work much more efficiently. Ironically, we have reached a situation in which regulatory pragmatism is preventing consumer detriment, not necessarily the regulation itself.
That regulators are assessing industry concerns, and now taking no-action positions and granting relief or clarity within their powers is encouraging.
ASIC recently extended the COVID-19 relief it announced in June for providing flexibility in the use of statements of advice and records of advice. It is another example of regulatory pragmatism now having to manage rather than resolve the gargantuan complexity and confusion besetting the provision of financial advice.
There is still much work to be done to achieve a simpler and less costly advice system in Australia. As the focus on every possible measure to support our economic recovery shifts into full-gear, next month the FSC launches Rice Warner’s ground-breaking Future of Advice report to start that conversation.
Zach Castles is policy manager – advice at the Financial Services Council.
