ASIC’s Report 632, Disclosure: Why it shouldn’t be the default, examined multiple cases both locally and internationally where financial product disclosure has been less effective than intended, ineffective or has actually backfired, contributing to consumer harms.
Done jointly with the Dutch Authority for the Financial Markets, the ASIC report aims to question the ‘myth’ that if consumers are given mandatory disclosure documents, they will be sufficiently armed to protect themselves from harm.
Clients can’t judge the quality of financial advice
A shadow shopping research exercise conducted by ASIC with consumers seeking retirement advice found a large gap between the technical quality of the advice (as assessed by ASIC) and the consumers’ own assessment of that advice.
While 86 per cent of consumers considered the advice they received to be good, ASIC assessors rated only 3 per cent of the advice reviewed as good, with the remainder rated as either adequate or poor.
Further, the research also identified a disconnect between the trust or level of comfort consumers felt with their advisers and the quality of advice received.
Even though 81 per cent of consumers said that they trusted the advice they received from their adviser, an ASIC review found that 39 per cent of the advice examples were rated as ‘poor’, and 58 per cent were only rated ‘adequate’.
Warnings on general advice don’t protect clients
ASIC found that most consumers do not understand the limitations of general advice despite the general advice warning. It cited research from March that found that less than half (41 per cent) of research participants understood the limitations and most did not indicate that they would take steps to check whether the advice was appropriate for them.
The research found that 38 per cent of participants incorrectly thought that the adviser had a responsibility to consider the consumers’ financial circumstances.
In addition, 38 per cent thought that the adviser was acting in the consumers’ best interest and 26 per cent thought they were prioritising the consumers’ interests.
ASIC also noted that 31 per cent of participants incorrectly thought that the adviser had a responsibility to consider the consumer’s financial goals.
Disclosure doesn’t solve complexities of financial system
ASIC deputy chair Karen Chester said the report highlights the need to rebalance the onus from consumers to firms – to become a shared responsibility.
To achieve this, she firms need to understand, measure and deliver on consumer outcomes, adding that this aligns with the Hayne royal commission and the ensuing government legislative reform program.
“The over reliance on disclosure in some ways proved an enabler of the poor conduct and poor consumer outcomes revealed by the financial services royal commission. Importantly, the royal commission represents more than a tilt away from disclosure,” Ms Chester said.
“The overwhelming majority of the commission’s recommendations – over 50 – are about better firm conduct.
“Put simply, disclosure has been asked to do too much. It cannot solve the complexity of the financial system. Especially when that complexity, in the form of thousands of barely differentiated products, is firm induced.”
Speaking of disclosures, how about actually disclosing that the shadow shopping exercise that ASIC referred to in their report was actually REP279 – conducted in 2012, well before Best Interests was introduced. REP632 is actually a broad discussion about the nature of disclosure in all financial services, and the behaviour of consumers, not about the quality of advice. Yet the media (including your own IFA) chose to focus on an old report that no longer represents the standard of advice currently being provided across the industry.
[quote=anon][quote=Anonymous]So ASIC you are now going to condemn advisers for putting in disclosures which you asked to be included in the first place?!
it was never asic. it was the stupids at your dealer group compliance, the fat heads that are not even lawyers who put in reams and reams of ineffective rubbish.
if you are in compliance, you better have a master of financial planning soon and pass the fasea exam.
advisers if some compliance person hasn’t got fasea cred make sure you let them know and tell them to get into long haul truck driving where they belong.
by 2024, if anyone tries to speak to me and they haven’t passed the fasea exam and have a post grad in fin plan they will be asked immediately to leave my office with the door slammed in their faces.
it’s coming. i am waiting. better get studying. most of you will never pass.[/quote][quote=anon][quote=Anonymous]So ASIC you are now going to condemn advisers for putting in disclosures which you asked to be included in the first place?!
it was never asic. it was the stupids at your dealer group compliance, the fat heads that are not even lawyers who put in reams and reams of ineffective rubbish.
if you are in compliance, you better have a master of financial planning soon and pass the fasea exam.
advisers if some compliance person hasn’t got fasea cred make sure you let them know and tell them to get into long haul truck driving where they belong.
by 2024, if anyone tries to speak to me and they haven’t passed the fasea exam and have a post grad in fin plan they will be asked immediately to leave my office with the door slammed in their faces.
it’s coming. i am waiting. better get studying. most of you will never pass.[/quote]
Well aren’t you a treat.
What do you think will happen when the advice industry is skinned down to 5-10k advisers?
ASIC and all the other bodies will need to justify their existence. Better be ready for the fine tooth comb!
I understand people like yourself live in your own bubble, but please try to understand the bigger picture here. No one wants dodgy advisers who steal money from clients. However over regulating and lack of direction from our government bodies is at a laughing point now. How do you justify it?
While 86 per cent of consumers considered the advice they received to be good, ASIC assessors rated only 3 per cent of the advice reviewed as good, with the remainder rated as either adequate or poor.
Just maybe ASIC are wrong. The client’s know what was discussed so I believe they are more likely to be a good judge than someone who thinks an 80 page SOA is clear, concise and easy to understand.
[quote=Anonymous]Look at AMP for example. For most AMP advisers, the AMP logo is a tiny small reference on page 20 of their website. Full Disclosure in this case is ineffective and AMP has a clear advantage given they’ve driven independent advisers out of the market. Clients walk into an AMP owned firm renamed XYZ Financial Planning and walk out with an AMP product called North. No wonder disclosure is ineffective.
yeah right so the failed lawyers and failed persons residing in the financial advice division of asic have consulted with each other and the big institutions and their plan is to increase more disclosures.
the newest one (haven’t you heard) will address your issue, it’s called the i’m not independent disclosure. it then follows another with where to make a complaint. sounds like a very good process for client on boarding and to inspire confidence in people to take financial advice.
YAY ! what a bunch of assholes, who comes up with this retarded shit.
Look at AMP for example. For most AMP advisers, the AMP logo is a tiny small reference on page 20 of their website. Full Disclosure in this case is ineffective and AMP has a clear advantage given they’ve driven independant advisers out of the market. Clients walk into an AMP owned firm renamed XYZ Financial Planning and walk out with an AMP product called North. No wonder disclosure is ineffective.
[quote=Anonymous]So ASIC you are now going to condemn advisers for putting in disclosures which you asked to be included in the first place?!
it was never asic. it was the stupids at your dealer group compliance, the fat heads that are not even lawyers who put in reams and reams of ineffective rubbish.
if you are in compliance, you better have a master of financial planning soon and pass the fasea exam.
advisers if some compliance person hasn’t got fasea cred make sure you let them know and tell them to get into long haul truck driving where they belong.
by 2024, if anyone tries to speak to me and they haven’t passed the fasea exam and have a post grad in fin plan they will be asked immediately to leave my office with the door slammed in their faces.
it’s coming. i am waiting. better get studying. most of you will never pass.
[quote=Anonymous]”While 86 per cent of consumers considered the advice they received to be good, ASIC assessors rated only 3 per cent of the advice reviewed as good, with the remainder rated as either adequate or poor.”
ASIC your job is to regulate to consumers expectations not to your own academic expectations. Consumers are the ones paying for the advice – not you ASIC. ASIC there’s a fair chance here the laws have been poorly written and do not reflect where society and consumers want advice to sit.
LET. THAT. SINK. IN.
I don’t care. Make it the high academic expectations. bring in even more disclosures. I am going to win either way. I am going to use regulatory arbitrage, as my competition is going to be decimated come 2024 (most will be gone much sooner)
take that you stupid people. you wanted to improve accessibility and affordability dint’ you dumb asses.
my invoices will put to shame most barristers (a lot of them are stupid and bankrupt anyway).
no, it’s not unethical to profit personally by following the rules
you made the rules, i will play by them and win
more regulation and red tape please!!! bring it, cuz i brought it
“While 86 per cent of consumers considered the advice they received to be good, ASIC assessors rated only 3 per cent of the advice reviewed as good, with the remainder rated as either adequate or poor.”
ASIC your job is to regulate to consumers expectations not to your own academic expectations. Consumers are the ones paying for the advice – not you ASIC. ASIC there’s a fair chance here the laws have been poorly written and do not reflect where society and consumers want advice to sit.
LET. THAT. SINK. IN.
I get that some consumers may not understand the advice and therefore not know what’s good for them.
However:
1. They don’t understand because they are given compliance documents that need to cover every legal avenue – because sometimes the regulator reinterprets the law and applies new standards retrospectively. This wont change unless the regulator changes their approach to regulation.
2. The regulator should be regulating against client detriment – not assessing towards clients Best Interests, This creates a different standard which means advisers have to end up producing monstrous reams and advice paperwork and supporting documents that clients do not read – nor care for.
i don’t want the current disclosure regime changed. i have adapted my process to it. charge only fee for service, i like doing the long hard hours. i have no complaints from clients, and even if they tried to complain they would never succeed because i have given them so many disclosures. before, during, after, afterwards, then after, then during, then after.
no one can complain as a result. if they are unhappy they can do it themselves. that’s fine. no complaints ever. don’t want it.
advisers don’t forget, people like to complain, if you don’t give these documents clients will want advice on the fly, take it out of context implement it without you and then try and blame you when things go wrong.
no way Jose, i am not going back to less disclosure. give me more red tape, as I charge a very high fee so i will just recoup it from clients.
as an already fasea approved degree holder including passing the ethics exam i can’t wait for 2024, or 2026 whatever, just bring it!
let’s see how anyone gets advice without going through me first, or a few thousand handfuls that remain afterwards.
we will have them by the short and curlys, then we jack up our price. i’m going to a $1,000 per hour flat rate.
bring on red tape, it’s marvellous, it’s glorious.
you want to give me a lemon of a process, i am going to squeeze it so hard i will make diamond tear drops from the stupid lemon.
p.s. diamond are formed because of intense heat and pressure that cause carbon atoms to crystallize
“While 86 per cent of consumers considered the advice they received to be good, ASIC assessors rated only 3 per cent of the advice reviewed as good, with the remainder rated as either adequate or poor.”
I call BS on this. ASIC assessors have no idea how advice operates in the real world. How can only 3% be good advice. I would be interested in a third party assessing these SOA’s or an Adviser Peer Group, to get more reliable feel for the quality of advice.
ASIC clearly have a conflict of interest when assessing advice, especially when they are chasing extra funding, and they have separated their remuneration from the government pay rates, so they can “attract more talent” (pay themselves more).
hey everyone. here is a certainty. except more disclosure. yeah i know they are ineffective the solution is to increase disclosure and cut the commission.
So ASIC you are now going to condemn advisers for putting in disclosures which you asked to be included in the first place?!
ASIC has put the expectation on advisers to provide relevant disclosures (outlined in an 100-page Statement of Advice which a client [i]definitely [/i] reads), to ensure we are fully compliant. But now we learn that these enforced disclosures aren’t effective. On the flip side, the report specifically highlights “simple key fact sheets and warnings were ineffective and harmed consumers of banking, insurance, investment advice and superannuation.”
So, hey ASIC… it’s no wonder you can’t even produce an example SOA and why advisers are so confused and overwhelmed by the red tape and more mixed messages!!!
ASIC is the blind leading the competent. We have a body who has no idea what good advice looks like dictating to the industry how to give advice. They keep adding in a regulatory burden to advisers (who just want to help their clients) to stop a very small amount of bad behaviour. They should understand that more compliance doesn’t equal happier clients or better advice.
So what exactly have I been doing these past twenty odd years. I’ve spent so much (unchargeable) time being compliant, utterly confusing clients who just want a bit of good advice, putting people off getting advice because of the amount of red tape and paperwork I have to churn out, losing clients because they can’t understand that I can’t give an opinion (written or unwritten) without knowing everything about them and can’t give actual advice without putting it in writing. It just goes on and on. No wonder we have so many unadvised people out there. Thanks for the ride ASIC. But I think the wheels are beginning to fall off.
There is very little transparency in ASIC reporting. Was this a witch hunt? Was it randomised? Was it representative?
Either there is a misrepresentation of facts, misunderstanding of what good advice is (can this threshold be explained and validated?) and whether perhaps most advisers better just shut up shop if good advice is unobtainable???
It’s odd that ASIC can say these things, yet with all it’s resources, cannot produce a decent, sensible example of a SoA ?
how much taxpayer money was poured into this drivel?
If Asic staff can do better then come down from the ivory tower and become advisers.
Wow ASIC you actually have worked out that ever increasing red tape BS regulation and disclosure does nothing but add costs and confuse clients.
So what will ASIC do ?
No doubt they will ADD more BS regulation and more BS red tape compliance.
Talk about Canberra bubble morons with zero real world knowledge or application.