Financial advisers have been saddled with conflicting regulations overseen by a number of regulators and need less regulation that is better formulated and will reduce the cost of advice, according to the Financial Planning Association (FPA).
The association stated it supported moves to create a simpler advice regime as part of its submission to the Australian Law Reform Commission’s (ALRC) Review of the Legislation Framework for Corporations and Financial Services Regulation – Interim Report A, in which it put forward some specific improvements as well.
“The FPA supports the ALRC proposals to make financial advice law and regulation simpler through a consolidated ‘rules book’ for financial advice. This approach would help improve the affordability and accessibility of financial advice for more Australians,” FPA chief executive Sarah Abood said.
“The financial planning profession doesn’t need more regulation, it needs better regulation. Financial planners are required to interpret a never-ending list of contradictory requirements placed on them.
“To ensure compliance, planners are required to comply with four laws regulated by eight regulators with additional oversight from Australian financial services licensees and professional associations and additional consumer complaint mechanisms through two ombudsman services and the courts.
“We believe this creates a significant risk. Financial planners are not lawyers, but it may be that the regulatory and compliance requirements under one act and regulator differ from those of others, leaving financial planners at risk of breaching one requirement in order to meet the conditions of another.”
Given these issues, Abood said it was wrong to assume clients can comprehend the financial planning legal framework.
“The current complexity in financial services law also makes it more challenging for consumers to understand, trust and engage with the financial system, and understand their rights and the consumer protection mechanisms available to them,” she said.
“We strongly believe that the language and structure of the Corporations Act must be improved to allow everyone – including consumers – to better engage with the financial services sector.”
As part of its submission, the FPA recommended general advice should be renamed as ‘product information’ and ‘strategy information’ so it was less misleading to consumers.
It also called for a review of the use of the terms ‘financial planner’, ‘financial adviser’ and similar terms such as ‘financial coach’, ‘financial mentor’ and ‘financial guru’ to determine if restrictions on the use of these terms were protecting consumers from unqualified financial advice.