A local senior financial adviser has predicted that the heavy regulation on the advice sector in recent years and the upcoming QAR will see the industry “self-regulate more” in the future.
Speaking on a recent episode of the ifa Show podcast, Nathan Fradley, senior financial adviser at Tribeca Financial and director at Ethos Australia, discussed his thoughts on what the sector looks like both in the short and long term, particularly after QAR reviewer Michelle Levy conceded that “changes need to be substantial” in the recently released proposal paper.
In the paper, Ms Levy put forward a number of proposals, including that the financial services regime should regulate the provision of “personal advice” which should be “somewhat broader” to ensure clarity.
“Look at what we can do within our capacity. We want to bring more people into the industry. Let’s create a positive environment. Let’s create change,” Mr Fradley said.
“Let’s start communicating the amazing things we’re doing, because if our documents aren’t taking us 20 hours to do, they’re now taking us 10, we’ve got 10 hours back to spend with our clients to spend on promoting ourselves to the community and doing a better job. And that’s really what I’m hoping this will come through.”
He added that self-regulation will be “really important” moving forward.
“I think the more we take that on ourselves, the more we become a profession, the more professional we become, the better we’ll stand in the community,” Mr Fradley said.
“That’s really what I’m looking for.”
Ms Levy’s proposal paper was widely praised by industry stakeholders, with SMSF Association CEO, John Maroney, calling it “a breath of fresh air”.
“Where the proposal paper suggests removing the requirement for statements of advice (SOAs) to allow the profession to provide financial advice in a way that suits their customers, it concurs with the association’s recommendations to the review that certain types of advice should be able to be provided in a simplified form,” Mr Maroney said.
“We have long argued for the need to recognise the professionalism of the sector, cut excessive red tape, and put the consumer front and centre in the advice equation.”
Speaking to ifa, Ms Levy said she is keen to hear feedback from stakeholders and whether her proposals could help to solve issues in the advice sector.
“So, I encourage people to think about it with an open mind to take and to be prepared to take responsibility,” she said.
“Are you doing the right thing for your customer or your client? If so, have some confidence in what you’re doing and the law should support that.”
Feedback on the proposal paper is now open and closes on 23 September 2022.
Listen to the full ifa Show podcast with Mr Fradley here.
I have a friend who is a suburban solicitor. The only thing looked at (by an external person – auditor) is the trust bank account. That’s it. Never been looked at for anything else in the past 25 years.
Surprised that Levy didn’t mention anything about self regulation. There are likely too many self-interested parties that want to retain the AFSL regime. What purpose does the AFSL regime serve for professional advisers?
What if we moved to self licensing? The (appropriate) regulator could set some industry standard templates and forms (Fee consent, etc), and provide industry compliance guidance (workshops, webinars, guides, websites) to help with self regulation. We could pay an industry levy which would surely be a fraction of what licensee fee are. Then every planner is on the same page and uses the same forms and follows similar interpretations of what is required via compliance. This is opposed to every licensee dictating what they think compliance entails with their own interpretations of the law.
Actually there is a large self regulation component in QAR. Banks and super funds will effectively self regulate the “advice” given by their sales reps and call centre staff. Under QAR those employees will be allowed to give personal financial advice without being subject to educational standards, Code of Ethics, or Best Interest Duty. It will be left to banks and super funds to decide how best to train and supervise their unlicensed, unqualified, employees. It will be a consumer protection disaster.
Well said – thank you. I am still surprised how many people who are clearly Financial Planners simply miss these facts – amazing.
This!!! The recommendations are a precursor to the 2032 Royal Commission into conflicted sales of products by unregulated salespeople that work for the big institutions.
For financial advisers meanwhile, she proposes removing the Best Interest Duty from legislation, but then keep it in the Code of Ethics.
I think she did indirectly…
She said that she prefers a principles based approach to regulating the industry.
A principles-based approach will set principles (The Code of Ethics) that specify the intention of regulation, rather than setting rules detailing requirements of a financial institution. In effect, the financial institutions act on the intent rather than being micromanged by millions of poorly constructed rules!
Yes but wait until licensees start bringing in their own compliance requirements to protect themselves. Nothing will be left for Planner to use professional judgement, but rather the licensee dictates everything.
Kind of right, up until you mentioned the Code of Ethics which does a neat crossover from high level principles to clear rules about how we need to work.