Compliance a barrier for multidisciplinary advisers

The complex compliance framework for financial advice is causing more difficulties for those who are multi-disciplinary financial advisers, according to Lifespan Financial Planning.

Commenting on the recent departure of accountants from the financial planning industry, Lifespan chief executive, Eugene Ardino stressed that the complexity of the framework was particularly difficult for accountants.

“I would agree that a lot of accountants who are also financial planners exited financial planning and I think a lot of that has more to do with a fact that the compliance framework for financial advice has become more and more difficult,” he said.

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Further to that, Ardino stressed that this was the group who was often wearing two hats, and operating both in the capacity of an accounting practitioner and a financial advice practitioner, and typically had smaller businesses for which the framework in its current shape caused a lot of concerns.

“[Accountants] have found that for the amount of time they have to spend to keep the wheels turning in financial advice is not worthwhile so they are exiting [the industry] to focus on accounting. That is why I said that being a multi-disciplinary financial adviser has become very difficult,” he said.

“It’s still possible for some to do it but it has become very difficult which is a little bit sad because the accounting profession is a very well-respected profession, and to see a lot of these professionals exit the financial advice is not a good thing.”

Lifespan said that although most of its advisers were holistic advisers, it also had specialists who offered limited scope advice, but many of those offering the specialist advice would be still able to offer the advice of the holistic nature.

“We encourage all the advisers to give a holistic advice and most of them do but we also encourage and support the limited scope of advice where it’s appropriate,” Ardino said.

“I think often advice is limited in nature as clients don’t always want you to review their entire circumstances. Instead, they often want the advice just on their investments, or just their super, or retirement planning or insurance in the area that sometimes is a specific piece of advice and we fully support that. Because you need it as you’ve got to be able to give clients what they want.”

At the same time, Ardino said that the legislative framework for limited scope advice also required improvement and that the Financial Adviser Standards and Ethics Authority’s (FASEA) code of ethics was one of the layers which added to the uncertainty in this area.

On top of that, the financial planning as an industry needed more stability, otherwise the numbers of advisers would continue to plummet while the demand for the advice would continue to grow strongly.

Additionally, the accessibility to the financial advice was not very good which would mean that despite the increasing demand for advice, the number of people in the community who could afford advice would be actually going down.

On the other hand, advisers were doing quite well in the moment as far as their client base was concerned. Ardino said that, despite most advisers being able to grow their number of clients at the faster rate than ever before, this was currently driven only by an overall huge reduction in a number of financial advisers and the exit big banks and institutions.

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Its testament to the high cost of providing advice. You can't adequately commercialise a compliant advice offering in a accounting practice if your core business (as the accountant) is tax, accounting, business services, administration etc and you only "dabble" in advice. Many accountants have genuinely tried to build an advice arm, others only got the limited licence just to be able to retain SMSFs as a string in their bow with the added services of SMSF administration and reporting, tax and potentially credit. The more successful practices have a dedicated financial adviser, either in-house or external via a referral arrangement so the accountant can stick to what they are good at and maximise the opportunities available in building good ongoing advice relationships from their base of tax clients.

I'm happy to stand corrected but I think most of the general public are NOT seeking Holistic Advice (at the appropriate price; expensive !) and instead just seeking advice around specific issues (at an affordable price; cough cough) from time to time. The theory about everyone needing Holistic Advice has been a contributing factor to the mess that the industry is currently in.

No-one has ever said everyone needs holistic advice.

The problem Old Timer is not the theory. It is the reality that the ridiculous level of compliance and autocratic regulatory framework forces this outcome. And surprise surprise it is then expensive.

We have fired clients that were with us over 10 years. We never made any money from them but they were always nice, polite and respectful so we were happy to keep them on our books as they just need occasional aged pension help. We fired them. Not because we weren't making any money, nor would we ever, it was that we couldn't manage the business risk under the FASEA code of ethics of making reasonable investigations to ALL their need and circumstances. They only wanted to know about their aged pension and we didn't have the time nor charitable capacity to make all these investigations, assuming the client even want us to!!

The problem, as always, predominantly rests in the regulator, FASEA, treasury etc.

We will happily consider you as a candidate for holistic financial planning. If you want occasional or ad hoc advice we would not consider helping you. We just cannot afford the business risk.

What some clients may want (non holistic) is not possible without public funding to support private business or for it to run by the government and funded by taxation.

Financial planning is at the crossroads. It’s not just the ballooning cost of licensing and compliance that’s the problem, but the limitations of the current business model. Reflecting longer and potentially more productive lifespans, people require the services of someone who can advise and advocate for them on a range of issues in making the best of their future.
There’s a tendency to claim to provide ‘holistic’ advice when in practice this covers only financial and insurance advice. Even the addition of specialties like aged care advice and estate planning does not make it ‘holistic’. Neither does a dose of ‘retirement coaching’, however professional.
True holistic advice is based on a shared understanding with the person about their values, expectations, and future. This requires a time-based process – longevity planning - which establishes the framework for a series of informed commitments – reflecting financial, career, health, succession, accommodation, aged care, dependency, and other issues.
The fulfillment of those commitments can be via others who may have special compliance requirements – such as financial advisers, accountants, and lawyers. The advocacy model empowers both the client and the specialists and underpins all relationships.
If ethically managed, the advocacy role has no ‘licensing’ requirements and streamlines the delivery of a wide range of services to a person by working collegiately with efficient specialists.

All compliance is costly - that is why it is imposed by ASIC, and why Industry Super has Intra Fund Advice, that is personal advice that is not really advice with no BID and not much compliance, Intra Fund Advice fees with no FDS, opt-in and no fee for no service issues etc.

Well designed system helping some and massive red tap for others? Huge money involved in Superannuation people.

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