In its submission to the regulator’s Consultation Paper 332 on promoting access to affordable advice, the AIOFP said while the option to provide scaled advice was clearly available through the Corporations Act, the “adversarial tension” between ASIC and advisers had led to a fear of how the regulations would be interpreted in an ASIC audit.
“Fearing an ASIC investigation for minor breaches has induced advisers to implement all compliance requirements to avoid possible prosecution,” the association said.
“This has led to massive SOAs and the cost of advice escalating to over $5,000 to onboard a new client.”
While the regulator has previously said it did not want to see “long documents” and “80-page SOAs” in the advice process, the AIOFP said such documents were a product of licensees’ and compliance managers’ fear of legal action by the regulator or AFCA.
The association said it was important for both regulatory bodies to engage with the advice sector in a more constructive way to reduce negative perceptions.
“We believe the most effective way to eliminate this confused, frightened, costly and manipulated environment is ASIC and AFCA regularly engaging directly with advisers on compliance matters in a panel format to ensure all are on the same page,” the submission said.
“This particularly applies to the composition of an SOA where the current culture is creating a circa 100-page mega document that most clients cannot be bothered reading or understanding but are paying for.
“The conundrum for advisers during an AFCA defence is clients stating ‘they did not understand the advice’ due to the size and complexity of the SOA, which is largely accepted by the judiciary, but advisers feel they have no choice but to produce such a document to legally protect themselves.
“This is an expensive vicious circle that needs addressing directly with ASIC and AFCA senior executives.”
By regularly engaging with advisers themselves when it came to ASIC interpretations of regulation and their practical impacts on advice businesses, the AIOFP said, the regulator would “give confidence to advisers to act in a manner that is appropriate” when it came to providing affordable advice.
What is missing in the discussion is the implicit requirement to only do what is necessary to meet the objectives of the client. How products and services meet the actual goals of clients is a missing piece in SOA’s I observe.
Should we be trying to shift the discussion to simply:
1. Make sure we are working for competent clients, and
2. Take a complexiyy driven approach to services so simple things take less time and cost less spo complex things take more time and cost more.
Yes, this is as odds at the regulators approach.
Yes, it is time to turn a fresh page and rethink what needs to be done to make acvice simpler and effective. Pandering to PI insurance requirements will not shift the situation.
Seems like the Regulator wants it both ways………………..
Interesting information. ASIC has a toxic attitude towards Financial Advisers. In my experience, this is in the ASIC DNA.
True enough, but they will say “That’s not our brief but a matter for government”. Bet $100 on it. They always take the easy, less productive option.
It’s far better to just go rogue and get on Tik Tok. Yes, being a “licensed” Financial Planner is like living in Nazi Germany but I’m used to it. However you’ve missed an important point AIOFP. If I wrote a SoA to meet SOLEY ASIC requirements it would be about 100 pages and not the 1000 pages. It’s not just ASIC and it’s not just the SoA. Processes are implemented to comply with the multiple layers of bureaucracy. I write a SoA and implement processes from the point of view of meeting ASIC regulatory guides, meeting the complaints body (AFCA, what’s best practice, I do things to meet PI insurance, I do things based on someone’s or a licensee’s interpretation of the corps law, so I don’t get sued. Statements need to be in a SOA to meet TPB rules (wind them up), Privacy laws, TPB codes of conduct, FASEA requirements, professional bodies, it just goes on and on.
Correct we have been producing 100 page SOA’s for years that’s not the problem (from a cost point) its now everything else!!!
Wow – well put. Each regulator just focusses on their bit and is happily blind to the rest. But the cumulative effect is red tape gone mad.
Financial advice should be available to all constituents, not the domain of those who are already wealthy.
How socialist of you.
A fantastic summary of the current environment. This is a thumbs up from me.
Meanwhile the crooks still perpetrate fraud because, well they are crooks and compliance does not bother them.
All this ridulous paperwork that remains largely unread is being done by honest ethical advisers at huge cost to clients. I would like to see a report that identifies exactly how much of funds expropriated by crooks has been recovered by ASIC action in the last, say 5 years.
It’s much safer to be rouge than comply. Being rogue means you’re not on anyone’s radar and can “get the job done” for your clients. And you’re likely to be too small for ASIC to search and find.
If your clients are happy then your business is safer than most licensed advisers AND you make a profit ! Win win. You can even recruit and train staff.
p.s. I’m being satirical
p.p.s. Kind of…
Are you saying I should start using some of my wife’s rouge?
Look, I had to get all petty with the grammar and spelling but Rouge is a colour and Rogue is someone who does whatever they want because they dont care about consequences or they believe they won’t get caught.
Perhaps the regulators could also engage Advisers by asking questions when they’re unsure of something (or as seems to be the case, where they don’t understand something; or their Analysts are inexperienced and looking to make a name for themselves) instead of skipping over this critical step and straight to issuing Banning Order hearings. It’s combative, unprofessional, scare-mongering, inefficient, ridiculous and gestapo-like.
Exactly!!!!