FPA chair calls out need for simple advice

The regulatory environment needs to allow advisers to use their professional judgement and give simple advice without fear of falling foul of the law, according to Financial Planning Association of Australia chair David Sharpe.

Speaking to Money Management, Sharpe said he wanted to bring about practical changes for advisers which would help them day-to-day. Perth-based Sharpe, who had run his own practice since 2009, took over as chair from Marisa Broome earlier this month.

“Part of why I got involved with the FPA is that I’m a practitioner and I want to make sure that is appropriately represented and give the members confidence that there is a practitioner who cares and feels the same way about issues and regulation as they do.

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As an adviser, Sharpe said his biggest challenge was being unable to help consumers with simple questions. He hoped the regulator in the future would allow advisers to use their own experience and professional judgement as to the amount of advice and work a client would require.

“[The biggest challenge] is when you have a client with a really simple need and you sigh because you know exactly what you could tell them really quickly but you know it would be a lot of work and you’d have to write a Statement of Advice. That is ridiculous, this is not great for consumers and it frustrates me I can’t give them the information they need in a two-minute phone call.

“As an adviser, you live in fear of ‘I’ve got to go through everything’. We need a scenario where someone can come in for simple advice, have a 30-minute meeting, receive the advice that’s important to them and leave. We don’t have a regulatory framework that allows for that and that’s what we need to solve.”

As a result, he said his two goals as chair were around advocacy and simplification.

“The regulatory environment is just unsustainable and creates so much drama, not just for us but for our clients as well. There needs to be simplification and a respect of the changes that are happening in financial planning in terms of professionalisation and educations.

“I don’t mean trimming round the edges, I mean repealing some legislation, we’ve had band aid after band aid put on until we’ve got to a point where an adviser can no longer give simple advice.”

However, despite the challenges, he still said being a financial adviser was his “dream job” and he hoped to be able to continue in the role.

“I sort of fell into a role that was financial planning and absolutely loved it and, barring someone saying I could travel the world and commentate cricket, this is my dream job

“There is all this frustration but then you have your client meetings and see the change that happens in their world because of how you’ve helped them and that makes it worth it. That's the fundamental reason why we still most of us get out of bed and drag ourselves through this compliance regime to make that difference for our clients.”




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Completely agree with David's comments. Very refreshing from the FPA. Hopefully they have turned the corner. Just hope enough advisers are able to hang on before the whole industry collapses

Fine words David but as FPA Chair your role should be more than just echoing what every other adviser is saying and thinking. Tell us what you are doing to reform the FPA so that it is taken seriously by regulators. Ditching grandfathered CFPs and membership payments from corporates would be a good start. The FPA's lack of credibility as a so called "professional association" is partly why we ended up in this regulatory mess in the first place.

True, but this is a good step in the right direction.

This is the first time I have seen the FPA come out and say something like this - bluntly stating legislation is not fit for purpose and unworkable. You'd never get anything like this from De Gori.

Agree totally. The FPA has pushed the need for professionalism and hogher education for many years now...somewhat at a very slow pace compared to how quick the Fasea standards were put in place.
It was really caught short for where the CFP sits which primarily would be because of the "grandfathered" CFPs. They need to go and so should several of the designations which are there for fees and only serve to average out the educational standing of the FPA.
The Chair needs to address this or we just keep getting the same going forward.
What's the the vision?
How do we actually get to a profession?
Unfortunatley we have been an industry that always wants a "carve out"
Take a stand David and tell us where you sit?

I 100% agree with David Sharpe. The focus always seems to be on ways to make the SOA shorter and quicker to produce when the real issue is having to produce them at all.

Classic example - last year in June I was presenting some advice to a client about his insurance. During the meeting he told me he sold some shares and had a large assessable gain as a result. I advised him to change his IP from a monthly payment to annual, it was due in the first week of July but he paid it in June and got the full tax deduction. I could do this because I had provided an SOA and could write an ROA afterwards. That then led to other questions about using super to offset the gain. This is the situation where you need to be able to give someone the full details, do an analysis of the tax saving he could achieve and explain how the concessional caps work. Instead, all I could do was give him general information because I knew I wouldn't have time before June 30 to knock out the 30 page SOA which was required to tell him "I recommend you put $x into super and claim it as a tax deduction".

That is the problem with the legislation as it stands. We don't need smaller SOA's, we need more situations where they're not required at all. An Accountant or Lawyer just gives the advice, invoices for their time and moves on, quick file note afterwards.

Strategy advice needs to be separated from product advice. No SOA would've been required in my scenario above if advice about super wasn't classified as Financial Product Advice. We should be moving to a situation where an SOA is purely a disclosure document - if you're recommending a product or product replacement then you provide an SOA so the client is fully informed about the basis for that recommendation. If you're recommending a strategy then the format of the advice should be whatever you want it to be - verbal, email, strategy paper etc.

Spot on Brett. Make sure you lodge a submission with Michelle Levy's Quality of Advice Review. It doesn't need to be war and peace. Even just a couple of paragraphs will do. We need to get the message through that SOA's and ROA's are detrimental to consumers in the majority of cases and it is essential that financial advisers are allowed to operate in the same way as other professions.

I agree with you completely. but for that to happen, we need to get rid of the AFSL system first and move to a system of individually registering the adviser. AFSLs can provide support services like xplan subscriptions, templates, lonsec research etc, but they must not be the advice provider. the advice providers should only be licensed, registered, and qualified financial planners. it sounds insane just to even say that out loud.

otherwise:

even if the law said you don't need an SOA the dealer groups would mandate one. business process.

even if the law said you don't need to do an RoA the dealer groups would mandate one. business process.

even if ASIC says you can provide limited scope advice no dealer group would agree to it. business process.

even if the government says no degree is required for an adviser with 10 years of experience, and only an exam pass, the dealer groups will require you to have a degree to be an authorized representative.

SOA is a small issue, it will solve half a dozen issues for half a dozen advisers a year. you can always do an SOA that is time-critical and provide one later (within 5 days).

SoA, being long, SoA being addressed by email, or video or other digital formats is not the issue.

the AFSL licensing system which is financial planners being authorized by people who have no business in the advice profession other than they are the owners of businesses who are in the business of authorizing financial planners.

until this issue is addressed everything that is done around the margins will not make an iota of difference costs will skyrocket as the adviser number dwindles down to 14,000 or probably less in the next couple of years.

You're pointing the finger at dealer groups but I'm not sure if that is the solution. Have you heard of AFCA?, PI Insurance? Privacy laws? AML?CTF? The first thing AFCA does in a complaint is it looks at industry standards and what everyone else is doing. Meaning because you're doing a 90 page SOA I also have to do a 90 page SoA. There is only a couple of PI Providers in Australia (lloyds of London and Lloyds of London) and they dictate the advice process more than anyone. We have an individual registration process now. It's called Self licensing. You pay a levy to ASIC, you put in a comprehensive application. It's approved or it's declined. Annually and more frequently you do things like quarterly compliance meetings, file reviews report direct to ASIC etc. You don't lodge a range of reports, yes you'll get away with it for 12-24 months but by 1-2 years it's all over red rover. Dealer Groups are then employed as service companies. That process is cheaper now than being licensed. Sadly Advisers don't want to do that because their licensee has persuaded/brainwashed them otherwise. I would point the finger at Bad Legislation and multiple regulatory bodies and the loss of self-regulation at the Royal Commission.

In some of the post election analysis a popular quote has resurfaced... "The Liberal Party thinks reform is good for everything but itself”. One might say the same of the FPA.

This is spot on David Sharpe - I'm disappointed every week that we cannot cost-effectively help more people. Those clients we regrettably turn away don't understand that it's not that we don't want to help, it's that we can't. We must do better as a profession and push through this change.

True David, but I'm worried the only carve out will be for Super Funds. Time we start merging David to have a more focused voice.....How many Doctors would join a body that wants to represent big Pharma, the staff of those firms, the community, and finally somewhere in that mix actual Medical Staff .

The is an important article by Laura. The affordability of advice is a critical issue for Australians as is risk management with inflation rising globally. The UK have addressed both issues with their national Money and Pension Service's 10 year framework of national Financial Well Being Strategy. David Sharpe should be across this and be representing the public and advisors by raising this issue in public forums because we are a long way behind the UK. The FPA's object: "should act in the public interest so that clients of members and prospective clients obtain fair and competent financial planning advice and to suppress malpractice."

Well done, Laura. David's voice has never been more important in public forums.

Best.

John Cosstick

I wonder, have many young kids, school leavers, or graduates say:
"financial planning is my dream job, and I'll be happy to do this job, for my career?"
One in a hundred, and they misread the question...

David Sharp has a horrible job, if he could get this number to 2 or 3 out of a hundred, in the next five years, I'd say a success, no one else in his position has had this sucess

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