Assurances by ASIC, Australia’s financial regulator, that it’s seeking to make financial advice more accessible and affordable for ordinary Australians are being undermined by increasing regulatory costs, the country’s advice sector claims.
The Australian Securities and Investments Commission in July published an infographic summary that brought together key issues raised by the industry in response to a consultation paper it released in late 2020.
That paper recognised that with large financial institutions either selling or scaling back their advice businesses and many advisers leaving the industry, there was concern that consumers might struggle to access affordable, good quality advice.
The regulator asked industry participants to come back with what they saw as the key impediments to them delivering such advice, so as to improve consumer outcomes and restore public confidence in the financial services industry.
The response was unprecedented. ASIC received almost 500 submissions from advisers, licensees, industry associations and other stakeholders. Many raised similar issues about why so few Australians have access to advice at a reasonable cost.
Advice is expensive, many of the submissions said, because of high overheads and fixed costs facing planning firms, rising regulatory and governance costs, and conservative licensee policies above what the law requires.
Also a big issue in Australia is a requirement that a planner giving personal financial advice must provide a so-called ‘Statement of Advice’. These ‘SOAs’ are voluminous and expensive documents, which require significant preparation.
Canvassed as a solution is a switch to a ‘Register of Advice’, a much simpler one-page document which sets out the client details, the basis of the advice, the costs and risks, the fees and remuneration structure and the client’s consent.
While planners have the option of providing ‘limited’ advice that does not cover all the areas relevant to the client, many in the industry say this is still too costly and faces the same regulatory requirements as full-service advice.
While the majority of respondents thought that strategic advice could benefit consumers, there was uncertainty about legal requirements.
As well, while digital advice is often cited as an alternative, less-costly route for advice firms, most respondents to the ASIC paper said they did not offer it, citing either a lack of demand or compliance concerns.
Is the goal slipping further away?
For its part, ASIC said it would continue to work with the industry on initiatives to help them in providing good quality, affordable advice to consumers. However, many planners are now saying that, if anything, this goal is getting even further away.
A case in point was an announcement by ASIC in late July to raise by 30% the levy it charges advisers to help recover its regulatory costs, which have been rising since the Hayne Royal Commission into the financial services industry.
Many in the industry say the increasing impost on planners and the ever intensifying compliance requirements are making the vision of affordable and accessible advice more and more unlikely to be achieved.
“Making financial advice more affordable for all Australians starts with making financial planning more affordable to practise,” Financial Planning Association chief executive officer Dante De Gori said.
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