In its recently published submission to government, the Financial Planning Association (FPA) has made a number of recommendations regarding “core issues” currently impacting the financial planning profession.
Citing the constricted supply of financial advisers in the marketplace, constant regulatory changes, and increased costs, the FPA argued that “it is important that regulations and regulators are delivering their important purpose in an efficient and effective manner”.
“Changing standards and regulations are being applied on top of an already complex regulatory framework that has evolved over many years,” the group said.
“The everchanging regulatory environment and increasing costs can result in financial advice becoming more unaffordable and inaccessible for many Australians,” it warned.
As such, the FPA has reiterated calls for the urgent commencement of the Treasury-led review of the ASIC Industry Funding Model — a review that, it said, should conclude before the expiration of the freeze on ASIC levies charged for personal advice to retail clients.
“To ensure such a review has sufficient time to undertake a fulsome analysis of this model and report prior to the expiration of the ASIC levy freeze, we believe the government must commence this review immediately,” the FPA said.
“As many practitioners are sole traders or work in small and medium-sized practices, their ability to absorb any additional regulatory costs or burdens is extremely limited. To provide certainty to the profession and provide adequate notice of any change, which in turn will help to ensure business models and planning can adapt, consultation with stakeholders should begin in earnest,” it added.
Next on the FPA’s list of demands are multiple details relating to the proposed Compensation Scheme of Last Resort (CSLR).
First, the body wants to ensure that the cost of establishing any legacy claims relating to the CSLR is borne by the government.
“Whilst we do not object to contributing to consumer redress, it seems unjustifiable to see up to half of the value of the industry cost recovery levies expended on administration and red tape on an annual basis. Therefore, the efficiency of the operation of the scheme must be closely scrutinised to ensure it represents value for money and is fair for contributors and effective for consumers,” the FPA said.
It also recommended broadening the scope of the scheme to include the entirety of the jurisdiction of the Australian Financial Complaints Authority (AFCA), and argued that industry cost recovery levies need to reflect the risk of a practitioner’s sub-sector to the broader scheme.
The latter, it said, “will ensure more equity across the financial services industry by ensuring the size of contributions is tied to the requisite behaviour and risk profile”.
Lastly, the FPA doubled down on its earlier advocacy relating to the tax deductibility of advice.
“We recommend that the government provide tax deductible status to all financial advice regardless of whatever stage in the financial advice process,” it said.
“This current tax treatment results in the benefits of available deductions for ongoing financial advice being skewed towards those of higher net wealth and incomes, and who can already afford financial advice for their established investment portfolios,” the FPA argued.
It concluded that while the provision of tax deductibility for fees associated with the preparation of an initial financial plan results in some costs to the budget, “such costs must be compared to the long-term advantages of the development of a more financially literate community”.
“To offset impacts on the budget, the inclusion of caps on the amount of any tax deductions or a cap on income for those able to receive a deduction, could be adopted.”
