AIOFP pushes for bipartisan support of financial advice agenda

The elimination or neutralisation of consent forms, compliance issues associated with statements of advice (SOAs), and the role of institutions in advice are among the top priorities for the AIOFP.

In an email to Mr Taylor following a meeting with the shadow treasurer, seen by ifa, AIOFP executive director Peter Johnston put forward the association’s main concerns in hopes of reaching a “bipartisan outcome” on what it sees as key financial advice issues.

“We are pleased you both recognise that your previous government had treated our industry poorly and despite most of our team being former Liberals supporters, we had no choice but to defend ourselves against your legislative brutality and determination to unfairly reduce adviser numbers,” Mr Johnston wrote.

“We were highly supportive of Mathias Cormann and his team leading into the 2013 election with fund raising and technical assistance. We will support any government that acts in the best interests of our members and their clients, conversely, we will defend our members and their clients where necessary.

“Our objective over the next 12 months is to get a bipartisan outcome with three critical issues leading into the next election. We have also given these views to the minister’s team and believe whoever comes out publicly first will get the immediate support of our industry.”

Consent forms are a key issue for the AIOFP, with Mr Johnston arguing that while they were “justified” when recommended by commissioner Kenneth Hayne during the royal commission to curtail the bank’s “fee for no service behaviour”, with the banks leaving “in disgrace”, financial advisers are stuck with this “ridiculous impost”.

“These forms exist in no other nation on earth,” he said.

Included in the email to the shadow treasurer is an explanation from AIOFP technical panel chair Lionel Rodrigues on why the consent forms impact financial advice businesses.

According to Mr Rodrigues, legislative requirements stemming from the royal commission have compounded the increasing cost of advice.

“Since the acceptance of the final report of the Hayne royal commission in 2019 by the then government, the empirical evidence is such that adoption of these recommendations have proven to be ineffective, costly to the consumer and has increased advice business expense,” he explained.

“The consumer benefits advocated by commissioner Hayne has proven to be non-existent.

“Much of the inaccessibility and unaffordability of advice has been a function of adopting the Hayne royal commission recommendations despite the professional associations, both financial planning and accounting, at that time, making representations as to the potential for the failure of public policy. By 2021 this failure was evident.”

Looking specifically at consent forms, namely the annual opt-in form, annual fee consent forms, and annual fee disclosure, Mr Rodrigues said there is “substantial duplication” in the processes.

“The information contained in the annual fee consent form is identical to the annual fee disclosure statement. Furthermore, all fee, costs, and performance information is available to all clients online daily,” he explained.

“Also, especially for superannuation, each year clients receive two statements, again specifying all fees and any other expense as well as performance and asset allocation. Investment portfolio clients receive this quarterly.

“There is an abundance of duplication of advice information to clients, especially fees. The administrative complexity of this has driven up advice costs and the evidence is such that for the consumer, quality financial advice has become inaccessible and unaffordable and only wealthy clients can now access this professional service.”

SOAs, which Mr Rodrigues said have ballooned into documents in excess of 100 pages, are complicated and expensive for consumers.

“Overzealous lawyers, confusion and fear of ASIC have been driving this ridiculous escalation over the past decade. It is time to allow advisers to exercise professional judgement with what relevant information a consumer needs to make a decision on their position,” he said.

The AIOFP has previously made its stance clear that if consent forms cannot be abolished, they must all be combined.

The current proposal in the first draft legislation from government’s Delivering Better Financial Outcomes package of reforms, released in November, suggests combining the annual fee consent form and the annual fee disclosure statement, with Mr Rodrigues recommending also including the annual opt-in form.

Institutional advice

Mr Johnston also pushed for a rethink of institutions being able to provide advice through “qualified advisers” with a lower qualification bar.

“We are in favour of all institutions having internally trained product information officers (PIO) who don’t need any qualifications (or be licensed) to provide information to consumers about their products and Centrelink ramifications,” he said.

“If the PIO wants to become an adviser, they can study part time. If the institution wants to give advice, they either outsource it or have conforming internal advisers.”

He added that the AIOFP is commencing work where industry super funds will outsource the member advice enquiries to AIOFP members on a fee-for-service basis and use internal staff for non-advice related information.

“We think the perfect advice model to strive for is no cross subsidisation, everyone pays for advice when the compliance regime is adjusted and advisers are permitted to exercise professional judgement when deciding on a financial plan content for a client,” Mr Johnston said.

“We are in favour of retaining the best interests duty to protect consumers. The ‘Good Advice’ concept is only good for one stakeholder and it’s not the consumer! If the institutions have the PIOs delivering information and their products fail, they should rectify the situation.”