Advisers need less prescriptive and more principle-based legislation in order to make the industry more efficient and more affordable to middle Australia, according to Diverger Limited.
Speaking to Money Management, Nathan Jacobsen, managing director of Diverger Limited, said the Corporations Act had become very operational and specific in how outcomes should be delivered to clients, rather than principle based.
“A reversion to a less prescriptive, less black and white and more principle-based legislation will actually provide, what is now a very professional adviser population, with the flexibility to execute advice more efficiently,” said Jacobsen.
In particular, fee disclosures and opt-in obligations had become “extremely prescriptive”, according to Jacobsen.
“They also place obligations, not just on the adviser, they place it on the licensee, they place it on the platform providers, and ultimately, the super trustees, through different legislation, see themselves as needing to see evidence as well,” he said.
Jacobsen said this had created a multiple-tier system of oversight for advisers.
“And this is on an adviser population that's been under a code of ethics now for two years,” Jacobsen said.
“It has been through the ethics exam; it no longer has passive revenue streams so it's actually substantially a more professional cohort of advisers.
“So we're over monitoring [and] over regulating the advisers and I don't think the evidence, when you look at the stats coming in at Australian Financial Complaints Authority (AFCA), supports that.”
Coming into an election, Jacobsen said the industry would love to see an intent to simplify adviser legislation whilst maintaining consumer protections.
“There is certainly support for that from both sides of politics but not a lot of detail,” he said.
“So I certainly would like to see a more considered approach to legislative approach change over the next two or three years and one that has more consultation with the industry in advance of the changes rather than at the last minute.”
Comments
And then he woke up from his dream and found nothing had changed...
While it is true that some financial advice legislation has become more prescriptive, much of it is not. The biggest contributor to advice complexity is that existing principles based legislation has been enforced in a draconian and persecutory manner by biased regulators. This has led to licensees and product companies becoming highly prescriptive and defensive in their processes, even when not required by legislation. The 100 page SoA is a classic example of this.
The biggest change needed is an overhaul of the current regulatory system whose culture and processes encourage biased bureaucrats to indiscriminately treat all licensed financial advisers as guilty criminals that need to be punished. The complete removal of ASIC and AFCA from financial advice regulation, to be replaced by a genuine single disciplinary body composed of responsible professionals, would be a good start. Hume's so called "SDB" only goes about 5% of the way down this path.
Responsible professionals like time-share executives judging financial advisers haha
Time share execs on the "SDB" are a good example of some of the 95% of the problem still needing to be fixed. A far worse example though is that every hearing is controlled by an ASIC bureaucrat who also selects the panel members. I'd have more trust in the integrity and professionalism of the time share mob. At least they don't have an "all advisers are guilty" prejudice.
To be fair, the "time share" people in this group will only be involved in cases where their expertise is relevant. Same with the stockbroking person.
It's some of the people in the financial advice group I had reservations about.
Surely there is not a time share executive on this panel? They could be the shadiest part of the industry
This seems so obvious. Doctors don't spend all day writing up notes & evidence that explain what took place during each patient interraction & then have everything picked over by a dozen different regulators & compliance people. They give advice using their professional judgement, then make some overarching notes & get on with helping the next person & they then need to explain their reasoning if a problem emerges. Why we need to put together a dossier worthy of a high court case each time we do the financial equivalent of telling a client to change brand of pimple cream just in case there's an issue down the track is ridiculous & not commercially viable.
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