The regulations governing financial adviser education and product recommendations are 20 years out of date and no longer represent the spectrum of advice nor the needs of consumers, according to a leading actuary.
The outgoing executive director of Rice Warner, Michael Rice said the current rules dictating the behaviour of financial advisers were formulated with different issues in mind and had been surpassed by new forms of advice.
“It is 20 years since the rules were written and they were largely written to protect people from poor products driven by people with conflicted interests,” Rice said during a panel session at the Stockbrokers and Financial Advisers Association 2021 conference in Sydney today.
“While they are still worth adhering to the world has changed and there is far more types of advice that are not within the rules, so we need change.”
Noting that the Corporations Act only regulates financial advice when it is related to a product recommendation he also suggested financial advice regulations should be contained in separate legislation and not start from a product basis.
“We should start with the definitions. To me the most valuable part is strategic and that is more important than the product they use to fill those needs
“We should also recognise specialist advice services and they could be treated separately with different rules instead of one platform which ends up being bureaucratic,” Rice said.
In keeping with this shift he also said the education model for those who provide advice should also be revisited.
“They have taken a blunt instrument and not thought through what people are delivering and what qualifications they need to deliver it,” he said
“If we aim at the top 5 per cent of the population who pay high sums for advice and risk losing their money, then the people giving advice need to be qualified, but most of the advice for middle Australia is quite simple and they don’t need the sort of qualifications outlined.
“We need to step back and look at what trying to achieve and who are the right people to deliver that properly.”
