New sheriff to temper regulation costs: Hume

In December, the government declared that it would designate advice standard setting to Treasury, while ASIC’s existing Financial Services and Credit Panel will administer the single disciplinary body for the sector.

Jane Hume, minister for financial services stated the change, which supposedly will allow regulatory settings to stay receptive to advisers, had been rolled out in response to rising costs.

“I’m firmly of the view that while it’s important that the regulatory settings remain responsive, they must make it responsive to the will of the people as expressed through the parliament and their elected representatives, rather than being in the hands of unelected officials who aren’t accountable to the Australian people,” Ms Hume said, in an address to the Stockbrokers and Financial Advisers Association Conference.

“In future, standards will be set by regulation issued by the Minister, and subject to parliamentary oversight and potential disallowance.”

Ms Hume admitted the previous regulatory standards did not consider the costs for businesses or how they would impact the accessibility of advice.

“Imposing more and more regulation and training requirements on advisors inevitably increases costs and takes time away from their job. And for small businesses this problem is particularly acute,” Ms Hume said.

“Ninety per cent of financial advisors are sole traders or part of a small business. Now, in the end, there’s no free lunch. We all know that these costs are ultimately borne by the consumer.

“So the government is committed to the professionalisation of the advice industry. But we’re also on the lookout for ways to achieve this goal while reducing the overlap and duplication of regulation that will help drive costs down. And it will also improve the accessibility of advice for consumers.”

The single disciplinary body folded in with ASIC, which already polices the sector, is meant to cut down on duplicate regulation.

As revealed in the recent draft legislation around the single disciplinary body, advisers could be required to complete an annual registration with ASIC. Ms Hume revealed that unlike the current system, where licensees can update ASIC on their authorised representatives after they begin to practise, they will now be required to tell the regulator and authorise the adviser before they start providing advice.

“The annual update information will also mean that the financial adviser register will be more complete and far more accurate, serving as a better resource for consumers, for licensees and for advisers alike,” Ms Hume said.

FASEA

But none of the regulatory changes will free advisers from needing to pass the FASEA exam, the minister was careful to note, with the government to not give any blanket extensions or exemptions.

Ms Hume also defended the FASEA exam requirement for stockbrokers, despite grumbles from the sector.

“Now, I know that the FASEA exam can feel very one size fits all. And many of you have expressed that view to me,” she said.

“In the current exam, stockbrokers had to answer questions where the case study may involve financial planning issues, or life insurance issues, which may not feel relevant to the job that you do today. But what the exam does is create a baseline level of knowledge and underlying principles that can be expected from any financial adviser.”

Stockbrokers, are now more than brokers – with many acting as personal wealth managers, Ms Hume explained.

So far, around 13,500 advisers have passed the exam to date. Around 1,385 stockbrokers have passed.