ASIC’s ‘Consultation Paper 332: Promoting access to affordable advice for consumers’, released on Tuesday, gave more details of how the regulator is planning to conduct its unmet advice needs project, flagging it would conduct more detailed roundtables with industry representatives following submissions to the consultation.
“There are several components to this project, including engaging with industry and other stakeholders about what practical steps ASIC and industry can take to promote the availability of quality affordable personal advice for consumers; and conducting research on the cost of providing advice, what financial decisions consumers make, and what types of information [an] adviser is required to gather and analyse when providing advice to a client to switch from an existing financial product to a new financial product,” the paper stated.
ASIC said following the collation of submissions to the paper and the series of industry roundtables, to be held in early 2021, it would “set out the actions we will take to help industry provide both good quality limited advice and affordable personal advice more broadly”.
The regulator said it would pass recommendations to government from the consultation “if we receive feedback on law reform that would help industry provide quality limited and affordable personal advice”.
ASIC noted that its recent consultations with industry indicated compliance concerns may be the chief reason advisers and licensees are reluctant to give scaled advice, but seemed to refute recent comments from advice groups that such advice was not compatible with the best interests duty.
“The importance of facilitating scaled advice is recognised in the legislation that sets out the best interests duty,” the regulator said.
“The legislative note to the best interests duty safe harbour provision in s961B(2) of the Corporations Act explicitly states that ‘the matters that must be proved under subsection (2) relate to the subject matter of the advice sought by the client and the circumstances of the client relevant to that subject matter.’
“‘That subject matter and the client’s relevant circumstances may be broad or narrow, and so the subsection anticipates that a client may seek scaled advice and that the inquiries made by the provider will be tailored to the advice sought.’”
ASIC also noted concerns around compliance with the FASEA code of ethics, while pointing out that the authority had clarified its stance around scaled advice in recent guidance.
“From our recent engagement with industry, we understand there are concerns about compliance with legal obligations, including the Financial Planners and Advisers Code of Ethics 2019, set by FASEA,” the paper stated.
“On 5 October 2020, FASEA released for consultation a draft of FG002 Financial Planners and Advisers Code of Ethics 2019 guide. This draft has revised FASEA’s guidance on limited or scaled advice.”
ASIC also suggested it may update the types of guidance it produces around scaled advice to make compliance easier to understand for advisers and licensees. Questions contained in the consultation paper ask for advisers’ feedback on whether podcasts, videos, a dedicated page on the ASIC website or more standalone examples on scaled advice topics would be helpful.
Further, the regulator proposed specifying ‘limited advice’ as the correct terminology to refer to single-issue advice, to provide a clearer distinction between this type of advice and personal advice.
“We consider that ‘limited advice’ is a more readily understandable term than ‘scaled advice’, because all personal advice can be scaled to some degree,” ASIC said.
“Advice that does not cover all areas relevant to the client is regarded as ‘limited advice’. Advice that covers all areas relevant to the client is regarded as ‘comprehensive advice’. Regardless of how the advice is scoped, the same rules apply to the provision of personal advice on a certain topic.”
Strategic, digital advice could lower costs
ASIC also raised the possibility of strategic and digital advice playing a bigger role in the delivery of affordable advice to consumers, asking advisers for feedback around if they currently provide strategic advice that does not make a product recommendation and if further expansion of guidance from the regulator in this area would be helpful.
The paper noted a widening gap between the cost of personal advice and fees consumers were willing to pay, quoting FPA figures that the average cost of an SOA was around $2,600, while Investment Trends 2019 research had indicated consumers wanted to pay around $500 for personal advice.
While the regulator raised the idea of digital advice playing a bigger role in the provision of affordable advice in the future, it conceded that “many consumers prefer to have human interaction when receiving advice”.
“In our research, we asked in group discussion and interviews whether participants would be interested in receiving digital advice,” the paper stated.
“Some participants said they would not be interested. When we asked these participants why they were not interested, they said that they preferred engaging face-to-face with a financial adviser because this allowed them to establish trust and rapport with the adviser.”
Why doesnt ASIC and all its lawyers just provide advice to all Australians for under $500? Can you imagine a lawyer wanting to work for $500 even just for 1 hour??? Laughable these people are.
ASIC/TPB/AFCA/FASEA want their cake and to be able to eat it to. They want advisers to do everything at a bargain basement price. Until they make it possible for people to walk in off the street with their financial details and get a quick diagnosis, then the world they are wanting will never exist.
here are some of the things they will need to do
Keep education requirements (except the silly FASEA exam)
Ban vertical integration which will also get rid of APLs
Remove the requirements for SOAs and ROAs (or at least keep it to 1-2 pages)
Keep commission on insurance but set maximum rates. Maybe increase the first year rate and ban trail commissions which will remove the need for annual opt ins – advisers can choose not to take commissions if they want.
Make all advice fees tax deductible
A single body be responsible for licensing and overseeing advisers, with AFSLs to be used by advisers for admin/tech/business support.
Opt-In is not required for insurance trail commissions. Insurance commissions are paid by the insurer to the adviser for the work they do in implementing and servicing policies on the insurer’s behalf. They are not a client payment.
If your licensee is making you do Opt-in for insurance trails, that is an inhouse compliance rule.
APLs are required by PI insurers. Independent advisers still have to use APLs. However they are typically much broader and more open than the contrived APLs used by vertically integrated licensees to funnel business into their inhouse products.
As an independent with PI insurance I run an open APL.
What ning nongs!
They smash the industry with a sledge hammer and then wonder why the average punter (who would benefit the most arguably from decent planning) can’t get advice at a reasonable cost.
They don’t work or live or understand the realities of life for the masses. Fools
ASIC is a regulator, not a legislator. It is totally inappropriate for ASIC to be staing it would be looking at Law Reform to make changes in this area of advice provision.
That is the responsiblity of parliament to put any legislation changes in place and then for ASIC to ensure that the regulations are being followed. Based on the recent happenings in ASIC they don’t appear to be able to manage their own operations and therefore cannot be trusted in the area of setting legislation.
Who do you think provides advice to the Government?
There needs to be so much change for this to be possible. When your average outsourced SoA costs nearly $500 it’s impossible as it stands. SoA’s would have to be reduced to a couple of pages, the amount of compliance for advisers and licensee’s reduced massively (this is where a lot of the cost comes from). I honestly can’t see the average cost of advice being reduced to $500 ever. The cost to produce the SoA and implement would have to be reduced to a couple of hundred dollars and I can’t see that happening on planet earth!! You’d have to have one quick meeting with a client then produce a very short SoA very quickly and easily.
I like that they talk about the cost of advice and disregard the value of advice. The cost is a combination of the time it now takes (for us to jump through hoops and cover ourselves from future litigation), the risk that we take on of being prosecuted in the future and the expertise we bring to the table.
That aside, I am considering putting a submission in, but worried that it will be a waste of my time. The whole regulatory system needs to be changed. Have one body and not the combination of TPB/FASE/ASIC/AFCA that we currently have. However, I question if they are going to recommend changes that would mean a reduction in the number of bureaucrats.
Yep ASIC will stitch up Advisers yet again, this time via it’s already well telegraphed push for ALL Advice via Robo Advice !!!
[b]Here’s an idea ASIC, Robo Regulators. [/b][b][/b]
They couldn’t do a worse job than ASIC currently are.
And they could be programmed without complete Regulatory Capture corruption towards Industry Super.
For start…. the term “BEST” Interest Duty presents an immediate problem to all concerned.
Using the word BEST allows a subjective and open ended opinion of what is deemed to be the best as opposed to acting in the clients interest.
In a dispute, it is virtually impossible to defend whether the advice provided was in the clients BEST interest as an a second or third opinion would argue that it wasn’t and that an alternative strategy should have been considered at the time.
Not only does the best interest duty place enormous risk and therefore cost in the provision of initial and ongoing advice, it also places enormous risk to the adviser in regard to any future challenge or dispute.
The duty by which the adviser acts should be altered to a “Client Interest Duty” whereby it is required the adviser will always act in their clients interest first and always.
ASIC, you might need what the fee the adviser is willing to accept to do the work. If it is unreasonable then the advice will not be provided. Just look at insurance advice, no wonder these companies are losing money. All I see is the hole getting dug up a little deeper.
No carve outs, its either advice from an adviser or not…