The terms of reference for the Quality of Advice review should identify opportunities for deregulation as the industry needs a “circuit breaker”, according to AMP Advice.
Matt Lawler, AMP Advice managing director, said the industry needed Government and regulators to all work together.
“Encouragingly Senator Jane Hume earlier this year signalled the Quality of Advice review will consider affordability of advice, not just quality,” Lawler said.
“We require reform which benefits both consumers and advisers, rather than perpetuating an unsustainable regulatory burden.
“The terms of reference for the review should include identifying opportunities for deregulation – there is a regulatory balance that needs to be found, because we don’t have it right.”
Lawler said with the industry absorbing yet another wave of regulatory change this month, it was clear a “circuit breaker” was needed.
“The Federal Government’s upcoming Quality of Advice review will be a critical moment for the industry and for Australians,” Lawler said.
“It presents the opportunity to reset the course for how financial advice is regulated and how it is delivered.
“Australia requires a thriving community of highly professional and trusted advisers. Yet adviser numbers have continued to fall, not just because of the additional qualifications, increasing standards and greater scrutiny, but also because with such a complicated and regulated advice process, the economics are increasingly hard to justify.”
Lawler said it was in the interest of the industry to have laws that protect and benefit consumers, but “the pendulum has swung too far”.
“Advisers have signed up for additional education requirements, a new set of professional standards, they have accepted the decisions of the independent arbitrator AFCA [the Australian Financial Complaints Authority], they are, as of this month, under the scrutiny of enhanced breach reporting requirements and from next year they will answer to a single disciplinary body for financial advisers,” Lawler said.
“Despite doing some major heavy lifting to sign on for robust compliance and professional standards, the delivery of advice itself remains complicated – and laden with paperwork.
“The Quality of Advice review is our opportunity to collectively implement constructive and positive change and to solve for these issues.”
Lawler praised the Financial Services Council whitepaper that was released earlier this month.
“The Financial Services Council hit the nail on the head with its whitepaper, which calls for ‘best interest duty’ to not just be about ticking compliance boxes, recommends a re-work of confusing advice categories and an overhaul of the complex statement of advice process, which has long been a sticking point for advisers,” Lawler said.
“With the standards setting function of FASEA [the Financial Adviser Standards and Ethics Authority] moving to Treasury, there’s also an opportunity to ensure the standards for advisers are fit for purpose, and where necessary make changes, maybe even admit that in some areas they’ve gone too far and make considered decisions to wind back some requirements.”
Lawler said licensees had a “pivotal role to play” and it was incumbent on them to continue to invest in technology, systems and processes that supported the efficiency of advice practices, compliance, and the delivery of quality advice.
“Licensees are as frustrated as the financial advisers we serve, and want to drive this change, but we cannot do it without the support of government and regulators,” Lawler said.
“Collaboration on policy is the key, importantly at the formation phase, not the implementation phase.”
Lawler also noted Australia could learn from the experiences of the UK who went through the Retail Distribution Review in 2012.
