Hume’s call for a principle-based regulation is ‘knee-jerk reaction’

Legislating a principles-based regulation framework should be considered carefully and not be a “knee-jerk reaction for popular support”, believes Synchron.

General manager of compliance, Phil Osborne, made the comment in response o the minister for superannuation, financial services and the digital economy, Senator Jane Hume’s, proposal to target a principles-based regulation framework at the AIA Adviser Summit last week.

Osborne said: “While principle-based regulation is the ideal destination for how we should be allowed to operate as an industry, we should regard this as a destination that will be arrived at after a bit more of a journey.

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“We need to think of this in terms of the application – whose principles will be applied? Will we be allowing advisers to use their professional judgement and be guided by ethical standards, as has been promoted since the introduction of the Code of Ethics?

“If so, what happens when the regulator disagrees with the advice provided? Do we then have to discount the principles under which advice was actually given?”

Osborne said the application of the principles on the consumer was an important and often overlooked consideration.

"How is a nuisance complaint to be treated? Under current requirements, the Ombudsman will always allow the client to decide whether to continue with the complaints process, regardless of whether there is any merit in their case," he said.

“With no disincentive for the client, the advice community is subject to the danger of moral risk under a principle-based system.”

However, Osborne said he wholeheartedly agreed with Hume’s opinion that the domination of checklists was complicating compliance and micromanaging the industry.

“Over the years, checklists that were simple and performed a valuable function have been bastardised – continually being added to and expanded to the point where we’re now seeing checklists for the checklists.

“Adding something to a process doesn’t necessarily mean it's an improvement. It’s the mentality of compliance departments to add extra things to supposedly improve compliance that now sees the industry overwhelmed by monumental amounts of documentation.

“Checklists, lengthy advice documents, onerous fact-finding demands have all had the effect of creating a bureaucracy that doesn’t support our actual purpose – to provide a service to clients.”

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Of course Ms Hume we need less regulation, less check lists, less tripplification of Fee Disclosures. Ms Hume you’ve been told this for years yet YOU HAVE DONE THE EXACT OPPOSITE.
Ms Hume, you are only trying to save your neck, rather than genuinely want to help.
Time to go Ms Hume, Frydenberg and LNP.

Since Dover folded, Synchron picked up the reputation of being the dealer group of last resort. If many of the group's advisers haven't been able to deliver compliant advice post-FOFA and already ignore the FASEA Code, I'm guessing a principles-based regulatory framework would be the death knell. In a two-horse race, always back self-interest - at least you know it's trying. Don't concern yourself with what's over the horizon - instead, tend to the wolves within your fences. Then we can talk about ethics and professional judgement.

"If many of the group's advisers haven't been able to deliver compliant advice post-FOFA and already ignore the FASEA Code"

You don't even know what you are talking about. Simply making generalisations about Synchron based on your own 'feel' about them.

I don't know Mr Osborne, but I'm always fascinated by how compliance people are all now saying yes the compliance system became overzealous, and compliance professionals prone to putting in unnecessary items to be safe in a file, but at the same time seemingly ignoring that they were the ones implementing the items? As if they have no responsibility in the calamity?

Osborne is right. 'Principle-based regulation' will only work if we are judged by peers, like other professions. Jane Hume gave the job to ASIC, which was a dumb idea and moves us further away from being a profession.

Of course its a knee-jerk reaction... everything the government has legislated since the Adviser Inquisition has been a knee-jerk reaction, even including prior actions...:

Cancellation of Insurance benefits in Super (for non-contributing members... knee-jerk
Opt-in insurance for new and young Super members... knee-jerk
More B/S paperwork for ongoing service fees... knee-jerk
reduction of insurance commissions... knee-jerk
Increase of responsibility period.... knee-jerk
FASEA.... poorly thought out knee-jerk

I could go on, but I can't be bothered... we all know the score. So why shouldn't a principles based change be another knee-jerk reaction?

When I did the Kaplan Ethics Course when FASEA first came in, they said it was a principle-based regulation (whole paragraph). I had the view that the licensees turned it into rules-based regulations because it justified their existence in the process.

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