FSC raises moral risk of too many self-licensed advisers

Intrafund advice would continue to have a role to play and dealer group licensees would continue to be a source of necessary capital adequacy under a series of discussion points and recommendations contained in a Financial Services Council (FSC) green paper on financial advice.

The FSC document also makes clear its belief that the Government’s Design and Distribution Obligations (DDOs) will add yet another layer to the regulatory burden already being carried by the advice industry which will need to be addressed.

Reflecting its membership base among licensees, the FSC green paper makes clear the organisation’s view that they will need to continue to play a role notwithstanding professionalism and the rise in self-licensing.

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The green paper said, “the current legislative and policy direction of advice affirms a role for licensees within the advice industry as well as providing a mechanism by which to promote consistency”.

“The introduction of new reference checking, information sharing requirements and breach reporting requirements for licensees reflects the importance of their ongoing role,” it said. “It is unreasonable for ASIC, or the incoming single disciplinary body, to supervise and monitor individual advisers consistently and sufficiently to the extent AFSL-holders currently do.”

“Removing this role would make it near impossible to monitor and provide independent audits of an adviser to the single disciplinary body,” the green paper said.

“Premature proliferation of a sector of solely self-licensed financial advisers, without the option to sign onto a Group AFSL while being individually registered, could create a moral risk for consumers. This could occur if individual advisers exit the industry leaving consumers orphaned and unremediated for misconduct.”

The green paper argued that “this consideration should influence future changes to the licensing of financial advice.

One of the green paper’s key recommendations is that “intra-fund advice should be permitted under Simple Personal Advice and Complex Personal Advice.

It argues that intrafund advice should not be defined separately, and be provided mostly as Simple Personal Advice, or where specific product recommendations are made, as complex personal advice.




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Forget COVID-19, we actually need a vax for the FSC virus!!!

Its already spread to ASIC FASEA FPA AND AFA ??

Wouldn't it be nice if, in representing us, our Industry leaders were slightly better educated, spoke well, understood the issues completely and knew how to use terms like 'moral hazard' - which is actually what was meant here.
Also what the heck is this whole paragraph? "Premature proliferation of a sector of solely self-licensed financial advisers..."

What a shameful piece of self serving, anti consumer, lobbying by the FSC.

The current AFSL based system was designed to give product providers control over advisers so they could be used as a "distribution force". It is the root cause of most of the problems in financial advice. Unfair contracts, biased APLs, incentive schemes, and weaponised compliance, are all standard techniques used by product companies to coerce advisers under their AFSL into selling more inhouse product. It is beyond ridiculous to suggest that conflicted product companies are best suited to managing adviser compliance.

This sounds like LIF all over again. A complete stitch up to benefit product companies at the expense of consumers and advisers. ASIC was complicit in that particular charade. Let's hope they show more competence and integrity this time around.

Again we have the self-serving FSC trying to manufacture outcomes based on its own mis-understandings of how advice works at the grassroots level. Its members are largely responsible for the current train wreck, but it thinks it still has a role to play. Its members have ditched their wealth management arms to the detriment of both advisers and consumers of advice. More muddied waters, more unadvised Australians, more wealth destruction. Not good enough.

Agreed. Did they say they have a conflict of interest?

Yep FSC scheming again.
They gave us LIF, to kill Real Advisers and flog dodgy direct Life Insurance but the RC stopped that.
They gave us the Banks AFSLs that lead to the RC with massive FFNS.
And now they want Intra Fund Advice to cover All Advice, including complex Advice, all pai for via Hidden Commissions, charged to all members when very few get Advice. Another form of massive Fees For No Service.
And let’s not forget the FSC yet again are trying to blame Real Advisers, Non Insto Adviser for some moral risk BS.
What an absolute disgrace is the FSC.
Disgusting crooks that should be in jail post RC.

Well good on the FSC for representing their members. I don't agree with the recommendations outlined in this article, but I hear they are also pushing for the abolition of SOA's. Where is the FPA and AFA on this? No other profession is required to write SOA's. They are costly, our clients don't want them and they are almost exclusively written to satisfy ASIC and compliance officers. If the FPA and AFA worked as hard for their members, financial advice would be in a much better place right now.

Dear FSC please please read Anon's comments as he has succinctly and clearly articulated the perspective of real advisers. I can only add that as an adviser the DDO obligations won't add any regulatory burden to the "advice profession" but will add some needed compliance to the "product industry" that you represent. Muddying the waters to avoid fair and reasonable obligations on product providers does nothing to build trust amongst consumers and only serves to make real advisers question what you have to hide?

Monday Morning Giggles. The FSC talking about Moral Hazard.

I'm sure the FSC would love to see us all in cubicles again on the phones drumming up sales, but let's for a moment pretend it's 2021. We've passed our FASEA (remember this was about ethics and competence) and our post Grad requirements, much of which was based around moral and ethical problem solving plus technical knowledge. So now as true professionals, "characterized by or conforming to the technical or ethical standards of a profession" (Webster 1C(1) how can the FSC claim a higher moral standing? After years of study and exams I would assume we're now capable of drawing our own conclusions as to what constitutes moral risk. Maybe we should see a list of FSC board members who have passed FASEA and the education standards.

Let's draw a comparison with the legal and accounting professions. According to the FSC's theory, all accountants and solicitors should work for a small number of large institutions where they are dictated to about how to complete a tax return or set up a business structure, or how they have to represent a client.
We know what happened to big law firms once they became allowed to advertise 30 or 40 years ago. Come and see us and we'll sue someone for you. Come and see us and we'll set up a dodgy insurance policy so you can claim straight away.
Big Licencees are certainly not the answer. Individually licenced planners where you have to take responsibility for your advice is what all other professions are based on. We should be no different.

If "some" advisers were self licensed these insto's would only have themselves to blame and not "rogue financial planners"....we can't have that.

The CEO oversaw and rolled over for ASIC on the LIF issue, say no more. They have about us much interest in genuine financial advice as I have in ecosystems of the Galapagos islands

The irony of this is just delicious!

the FSC knows that adviser numbers are dwindling fast and that by 2026, it will be down to about 5,000. they also know that the 5,000 that remain will be fiercely independent and won't kowtow to anyone's demands and if everyone is self-licensed, then they haven't got a hook into us to make us bend to their will.

so they are trying to do whatever they can to make sure the regulations are loosened, for example, no requirement to provide SoA's etc so they can hire monkeys and get the to jam product down clients throats.

we have to resist their demands, and insist on even longer SoA's i am not giving up on 150 page SoA's until the FSC choke on it.

So Advisers need years of study, do a professional year, pass FASEA exam, ongoing CPD and if self-employed pay ASIC fees, TPB fees, licensee fees, PI costs etc. Yet you can have a call centre dishing out "advice" with someone on the end of the phone with no qualifications or experience behind them.

What is next? We could just have a call centres for every of industry. Lawyers, Doctors, engineers Accountants with unqualified staff providing advice. What other profession allows this?

The FSC lecturing on Moral Risks!! Now I've seen it all! Individually licensed advisers, not linked to any of these morally corrupt institutions and their self servicing agendas are the ONLY way to ensure people are looked after in the manner they need and deserve. We are now in the age of the IFA, get used to it Ms Loane, we are here for the clients, not you.

The corrupt FSC talking about "moral risks" is laughable. The reason so many advisers are self licencing is because dealership costs have become too high to justify what we need them for. One of the many reasons for the pricing increases for example is the FSC's LIF which has decimated the life risk market. Perhaps the FSC should pay more attention to fixing the issues they have caused and their own morals first.

We are already personally liable for our own advice, this is why we pay our own pi premiums. The self centred fsc really should not be listened to, we have worked very hard to be seen as professionals, we dont need dealerships to "look after us" anymore. Self licencing must surely be the way forward, dealerships cant make money anyway, they are just squeezing us harder and harder every year
We need to be able to access alternatives or else us smaller ones will just be forced out. Ironic that our dealership fees pay thier membership to the fsc. More nepotism.
No one could build a business from scratch now, as I did 6 years back, there are way too many overheads. They need to be reduced and the biggest cost we face as planners is dealership fees, paying for marketing departments and so forth we dont really need. We need choice, and not the current afsl regime its too hard for one or two people to run an afsl, in my opinion anyway.

Arsonist and fire brigade
FSC have caused a problem, and now they want to 'solve' it. Hmmmm- bit like being both arsonist and fire brigade

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