Is the disconnect between client needs and regulatory framework expanding?

Ben Neilson, the founder of Neilson & Co Wealth Management, has published an interesting dilemma on LinkedIn alluding to the expanding disconnect between client needs and the regulatory framework.

In a post on his page last week, Mr Neilson admitted that after concluding that the mental stress wasn’t worth the remuneration, “I advised that a client should resign from her job”.

“We agreed that her happiness far outweighed the environment she was unnecessarily placing herself in”.

What this dilemma made Mr Neilson realise is that the gap between a client’s needs and the regulatory framework has increased.

“Can anyone tell me which regulatory guide or Corporation Act section(s) this type of advice falls under, please? Anyone able to measure the tangible impact of this ‘advice’ versus the more conventional advice sectors?” he questioned on LinkedIn.

“Is this even advice?

“No?

“This is why it’s imperative that practising financial advisers are actively involved in developing the regulatory environment around them. To govern, we must understand the operating conditions, to set frameworks, we must comprehensively understand scenarios and to lead we must create,” Mr Neilson wrote.

“What happens when the existing advice framework fails to meet the future mould?” he asked.

Speaking to ifa, Mr Neilson explained the rationale behind his post.

He noted that as advisers emerge into a profession and consider responses to developing client queries, ensuring that the regulatory framework can support them accordingly is imperative.

“At present, a significant weighting is placed on the SOA document, which often only includes products, figures and amounts,” he opined.

Mr Neilson pointed to research conducted recently by his firm that showed that decreasing consumer value is being placed on traditional advice documents, a finding which, he said, is at odds with the regulator’s point of view.

“SOAs stand primarily as a legal document and when surveyed, returned low levels of responsive consumer comprehension, value, and trust. Also, granted it’s the major byproduct of financial advice, do we think it’s strange that such limited research and literature has been completed in this space?

“The point surrounds, ‘rules’ being created ‘for us’ instead of ‘by us’, granted the high credence financial advice process is unique, it’s imperative that active registered advisers are included in the creation of regulation, or we may continue to see further disconnects requiring us to spend more time doing tasks that clients fail to see value in.

“Increasingly, advisers are becoming subject to comments and conversations that are incredibly valuable from a client’s point of view, but fail to fit within the current ‘moulds’ of traditional advice — what’s the solution?” Mr Neilson concluded.