Stop prioritising compliance over client needs says SMSF Association

Compliance and the needs of licensees are being prioritised over those of consumers under the current regulatory regime surrounding financial planning, according to the SMSF Association.

The SMSF Association has released its submission to the Australian Securities and Investments Commission (ASIC) affordable advice regime and has strongly criticised the manner in which barriers have been placed in the way of making advice more affordable.

It said the current regulatory system was failing consumers with an outdated compliance regime, impost from licensees and the manner in which scaled advice was being handled.

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SMSF Association chief executive, John Maroney said that many of the problems could be addressed at an overarching level by improving the quality of regulation and guidance that governs the provision of financial and tax advice, including minimising the burden of regulation on businesses and individuals.”

He noted that the SMSF Association submission had listed eight factors inhibiting a better regulatory advice model: compliance costs and levies; licensees creating a significant extra layer of compliance and costs; lack of clarity on how scoped advice can be provided; compliance advice documents that are not fit for purpose; ASIC’s image; guidance often not understood or read; the failure of the limited licence framework; and a regime that doesn’t support strategic advice.

“The SMSF sector could benefit greatly from the introduction of ‘strategic advice’ that could be an integral part in developing a far more consumer-focused financial services regulatory system,” he said.

“The current regulatory system makes it very difficult for SMSF trustees to obtain the limited SMSF advice they require. We believe every effort should be made to implement ideas and changes, even where improvements may be difficult to fit into the existing framework – and strategic advice is central to this.”

Maroney said the growing interest in strategic advice had evolved because many consumers want that sort of advice rather than advice on specific financial products. Additionally, with comprehensive advice out of reach for many Australians due to cost, it is clear more are seeking piece-by-piece strategic guidance.

“With improvements to the way limited advice is offered out of CP 332, strategic advice could be the foundation on which a consumer-focused framework is built.

“This could ultimately allow appropriately educated advisers registered with the single disciplinary body to provide strategic advice on areas such as superannuation, retirement and cashflow without specific reference to financial products. 

“A strategic advice model allowing suitably qualified professionals to practise under a ‘no product recommendation’ environment would see advisers given increased ability to provide strategic advice without conflicts of interest. It would also address the false perception that financial advice is simply ‘selling products’ and in time would help to address the issue of trust in the sector.”

“A reimagined advice framework has the opportunity to be beneficial for all Australians. It will include more advisers in the profession, less regulatory impost, greater strategic advice and more accessible advice which is more affordable for consumers.”




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I agree with the sentiment but I really struggle with this idea of professionals who only provide strategic advice but cant provide a product recommendation. Sure there are situations where this is practical but there are very many more where the strategy etc is critical and forms the core of the advice - and the client value - BUT at the end of the day the strategy has to be implemented which often involves some form of product. Even in SMSF land, clients inevitably expect advice on product whether it be insurance or investments. How many times do accountants get asked what shares should I buy?
The real killer in our profession is that the whole compliance and regulatory framework is based around financial products rather than being based around advice. Remember, the reason unlicenced professionals cannot recommend a SMSF, or contributions, or pensions is because they are "financial products".
I really wish our professional associations would stop pussy footing around this core issue. The law is badly overdue for a rewrite. Its time to be brave and forward thinking.

I wish to support Clem's "real killer in our profession" comment, that the whole compliance and regulatory framework is based around the sale of financial products (as defined in the Act) rather than the regulation of advice. The fact that real estate is not legally defined as a financial product (i.e. a security) is the reason why ASIC is unable to prevent "advice" in relation to the promotion and flogging of overpriced investment real estate, with commission kickbacks to the salesman from the promoter/developer. Misleading and deceptive claims are made about future growth and returns – of course never in the form of a written SOA.
That part of Chapter 7 of the Corps Act should be completely repealed and replaced with a comprehensive definition of financial Advice – this would capture any person providing advice on any form of investment, to the consumer. On many occasions, we are required to give advice in relation to strategy, or other advice which does not require the sale of any investment product. This fundamental basis for regulation of advice is now outdated, outmoded and desperately in need of replacement or updating. This would greatly simplify the regulation of advice and would go a long way towards reducing the costs – – provided the shackles are removed of having to provide every piece of advice in writing. Time is money. My General Practitioner medico, my Accountant and my Lawyer do not have to confirm everything they have told me in writing, providing several other alternatives which have been considered and the reasons the other alternatives were not recommended. We all go to these aforementioned professionals because of their training knowledge skills and education in their specialist fields. If I receive poorer advice from them, I still have the right to sue them. If any of these other professions were shackled with the same compliance obligations which required all the advice to be documented in writing via a 30 – 40 page SOA, their professions would immediately grind to a halt. The mismanagement of the advice sector by ASIC and the successive governments is now clear for all to see. We are being punished for the sins of the Big Four banks + AMP, who can't make money out of simply giving advice – they can only make money out of selling product, which is no longer possible due to Best Interest Duty. I hope that ASIC will use the feedback it gets from CP332 as the excuse they need to suddenly "see the light"and do something radical.

I like the fact that a professional assoc is willing to put it to ASIC.

Overall i believe the sentiment of what they are stating is true throughout the advice profession, and ASIC has gone rogue.

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