Raising consumer disclosures to manage issues such as conflicts of interests has only pushed up the cost of advice, as consumers don’t read the details of lengthy documents, according to Midwinter Financial Services.
Midwinter cited the Australian Securities and Investments Commission (ASIC) ‘REP 632: Why it shouldn’t be the default’ report that showed only 20% of consumers read disclosures, while only 10% said they do thoroughly.
This came as advisers were expected to continuously disclose fees to clients, as well as statements of advice (SoAs) alienating clients, creating the risk that consumers were being overwhelmed with information due to regulatory compliance.
Ivon Gower, Midwinter Financial Services head of product, said regulations had caused another round of unintended consequences.
“The cost of advice continues to escalate, and many advisers are now leaving the industry,” Gower said.
“As an industry, we know that moving away from product-led advice and towards strategic advice is the way to deliver better outcomes for clients.
“The question is whether we currently have a high-performance regulatory framework that supports quality advice.”
Gower said technology should help lift some of the regulatory burden from the advice sector, as many advisers were fearful of inadvertently breaching regulations such as the best interests duty.
“The focus often falls on product fees which, on paper, can easily be used to justify product choices,” Gower said.
“However, fees are just one factor that help generate net returns, which is only one component of helping clients achieve their broader strategic goals.”
Gower said the right platform should make it easy to generate, save and search SoAs and records of advice (RoAs) that clearly outline the rationale for advice.
“The industry may not yet have a high-performance regulatory framework, but technology can automate many of the recurring areas where a practice can inadvertently slip up,” Gower said.
“The regulatory equilibrium in the advice industry is well intended, but not yet balanced. It's unlikely to change in the near term, which means technology will have an increasingly important role to play in bringing quality advice to as many Australians as possible.”
Comments
Ok another IT guru talking rubbish the IT systems are somehow going to solve the massive BS Regs and Red Tape burden.
Wake up IT dreamers, we’re still waiting for the mythical paperless offices and more specifically in Advice straight through processing from electronic fact finds, automated SoAs straight through to investments placed and all with the IT smarts solving all personal, individual, BID, FARSEA code issues etc. Yeh NUP!!!
Get in the real world Midwinter. Sure IT can help business efficiency but IT cannot solve STRANGULATION BY MASS BS OVER REGULATION. Stop talking IT rubbish and help fight the real problem.
And if ever BS Regs are reduced then IT can have a much greater function, in a significantly more streamlined Regs advice world.
Midwinter is right to identify regulatory complexity as a big problem. But wrong to suggest technology is the best available solution. That's the Hume copout. Technology purchased to manage regulatory complexity is still an unnecessary cost, and it doesn't make things any simpler for clients. The only solution to regulatory complexity is regulatory simplification.
Every financial adviser, all their clients, and all consumers who have been priced out of professional advice, should be constantly making this point to their local federal member and all 12 of their state's senators. It doesn't matter what party they're from, every politician in the federal parliament has contributed to the current mess. They all have some responsibility for fixing it.
Silly statement to all those who are coping with the regulations and laws. Sadly I consider Midwinter out of touch and I am less than impressed.
Yep. Just another product flogger trying to flog more product...aka...FSC. Product floggers should have no input into advice policy. Simple. That's the role of Advisers and their inept associations. One day we'll lead the discussion. Based on current experience, that will be about 2050.
Technology cannot be the solution to create personalised advice .Clients need advice that is specific to their situation , it’s more about common sense and empowering clients with information. Technology only overwhelms clients , increases costs , creates cookie cutter SOA, s to justify fees but will not leave a client happier
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