Financial advice will not be improved through alterations to compliance documents or the introduction of technology to the current model of practice, but through a clean-sheet approach that reduces the cost and improves the availability and efficiency of providing it, according to the Association of Financial Advisers (AFA).
Addressing the AFA national conference, Vision 2020, today, association policy and professionalism general manager Phil Anderson said improving the model of financial advice would involve a “total re-engineering exercise”.
“We need to start with a white sheet of paper and we need a quantum movement forward on the whole design of financial advice,” Anderson said.
“We have many years of new regulations loaded on top of the sector – the Financial Services Reform Act, the Future of Financial Advice, the Tax Agent Services Act, life insurance reforms and professional standards, and more through the Hayne royal commission, but what we need to do is look at it and make sure these work in an integrated way and serve the interests of clients.”
He called for a “new blueprint” for financial advice, based on an independent and comprehensive review of advice, which would address reducing the cost of providing advice and making it more accessible for more people.
The new model would also consider how financial advice could be provided efficiently so consumers did not have to wait a long time to receive it and that life insurance advice remained a viable and sustainable area for practitioners working in that field, he added.
“We also need to confront the issue around licensing, and this dialogue has started, whether it’s talking about individual licensing or if there is a better way. It is important to have that debate, but we need to understand all the facts and make sure the right decisions are made for the right reasons,” he said.
He said the removal of duplication and inconsistency across regulators also had to be addressed and proposed the development of a single disciplinary body may resolve that problem.
“We need to make sure the end output of the process is of value to clients. People say clients don’t read statements of advice (SOA) so there must be a better model of providing advice,” he said.
In calling for a new advice model, he noted issues identified as problems, such as long SOAs, were actually symptoms of problems created by successive layers of regulation.
“Some say one of the problems with advice is the length of statements of advice and records of advice. I think in many ways they have become chapters of advice or small books of advice, which is not what they were intended to be – a short record of advice,” he said.
“People talk about the implications of these long advice documents and I say they are a symptom of the problem, not the problem itself.
“The reason they are long is because of other obligations that advisers need to comply with and is why I am saying there is no simple solution here.”
