ASIC, Regulation

Consistent advice must avoid checklist routine

The Australian Securities and Investments Commission (ASIC) has reaffirmed its position on how the financial advice industry should achieve consistent standards in light of the banking royal commission.

At the Institute of Public Accountants 2018 National Congress in Sydney last week, a licensed accountant queried the corporate regulator as to how advice standards can be made more consistent across the board.

“I provide financial advice, but the frustrating thing is that different dealer groups all have different ideas of what’s appropriate advice for their clients,” the delegate said.

“I like ASIC’s approach to red tape, but as a plea from all of us, what can be done by us, as advisers, so that when we give advice, we know that in future ASIC won’t come back to us [questioning whether it was appropriate].

“We want to know what is the actual playing field because we want to give advice and feel good about it, because at the moment that doesn’t happen.”

In response, ASIC commissioner John Price said: “As soon as you reduce complex business activities, like providing advice, to a tick-a-box arrangement, you’re just asking for trouble.

“Having said that, I do think there’s a good opportunity for dealer groups across the country to get together and set out what they think are the right standards to a client more generally, that will assist portability when advisers go [to and] from dealer groups. And when that happens, we’re more than happy to discuss with industry as a whole what the right standards should be.

“But what I don’t think would be particularly helpful is having every dealer group coming to us on a case-by-case basis to check if this is alright.

“Going back to my first comment, I don’t think it’s appropriate to reduce advice down to a checklist-style mentality, particularly where people’s livelihoods are at stake.”

He said achieving consistent advice standards must be industry-driven.

Price also commented briefly on the industry funding model, which initially resulted in increased SMSF auditor fees, before they were reduced by about one-third after industry submissions.

“The reason we supported an industry funding legislation the government put through is that there was great cross-subsidisation of our work and it was often funded by members of the public,” he said.

“So it was a clear principle when we thought about the issue, that is, if an industry sector generates the need for regulation and the need for regulatory work, they should pay for it.

“That obviously raises the question of how do we [arrive at] costs for particular activities within the financial system, using SMSF auditor registration as an example.”

He underscored the need for the regulator to go through a consultation process to recut the figures and costs passed down to SMSF auditors and other financial services professionals every few years.

“The good news is, for industries that make an effort and reduce the amount of time we need to spend on matters, you will see a decrease in the regulatory costs, you will see a decrease in the fees you pay,” he said.

“In fact, in some areas where we already have industry funding we have sent refund cheques to people because it’s not costing us as much as it has in the past to regulate them; stockbrokers are a positive example.”

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