The regulatory framework for financial advice is unnecessarily complex and costly and ultimately fails consumers, the SMSF Association has said.
As part of its submission to the Australian Securities and Investments Commission’s (ASIC) paper examining new approaches to the provision of personal advice, the association highlighted several factors preventing a better regulatory model for financial advisers and called for reform that would enable the provision of affordable, accessible and quality advice to consumers.
SMSF Association chief executive John Maroney said: “After nationwide consultation with our members, the association has found that the advice process is lengthy, costly and prioritises compliance and the needs of AFSLs (Australian financial services licensees) over consumers.”
In particular, the association pointed out the limited licence regime was not fit for purpose and prevented SMSF trustees from accessing basic advice in a convenient manner.
Removing limited licensing and transitioning to a new framework that put consumers first in the form of a “strategic advice” offering rather than advice based around specific financial products was central to improving the system, it added.
It also listed compliance costs and levies, licensees creating a significant extra layer of compliance and costs, and a lack of clarity on how scoped advice could be provided as factors inhibiting an improved regulatory system.
Factors such as compliance advice documents that were not fit for purpose, ASIC’s guidance often being misunderstood or going unread, and the regulator being regarded as non-consultative were further hindrances, it noted.
“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,” Maroney 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.
“We look forward to consulting with ASIC in their upcoming roundtables to work through our recommendations that include modernising statements of advice, reducing red tape where required to provide scoped advice and exploring how ASIC can update its guidance to be more accessible, consultative and persuasive.”
Earlier this week, the Stockbrokers and Financial Advisers Association called on the federal government and ASIC to move away from a single-model approach to financial advice that forced consumers into advice models that did not suit them.