In a submission to the Life Insurance and Advice Working Group – in response to the interim Trowbridge report – South Australian practice Enva argued that the current dominant model of corporate licensing should be replaced.
“There is an unhealthy conflict caused by the licencing system,” the submission said. “AFSL holders have a financial incentive to cover up poor advice and provide support to advisers who struggle with compliance.
“The best way to improve quality of advice is to start by requiring advisers hold a membership with a professional body and if they are exited from that professional body or suspended from it, they should not be able to practice.
“This should be the first step along a path that shifts the license status away from product manufactures to professional bodies – one the FPA and another the AFA,” the submission said.
Enva argued that these professional bodies should then take over the compliance and oversight capabilities of a licensee.
However, the firm added that dealer groups should still exist and that “vertical integration provides great benefits from a system and technology perspective”.
“With professional bodies in charge of the licencing of advisers you would eliminate the “phoenix problem” of low quality advisers shifting dealer groups to avoid prosecution,” it said.
The submission also argued that the requirement for a degree for financial advisers is “simply overkill”, highlighting that advice is “not that complicated”.
“The position is primarily a relationship manager using the resources and research of dedicated specialists,” the submission said.
“Advisers don’t need to know all the answers, they just need to know where to find them.”
What is the standard the professional bodies will enforce? The minimum legislative/regulatory level or something higher? In my experience, there is a clear difference in the quality of advice customers receive between advisers supervised by AFSLs (aligned and independent) who have standards that simply meet the legislative/regulatory minimum requirements and AFSLs whose standards are set higher, creating a buffer. Advisers can choose who they represent. Those that choose AFSLs with high standards, do so for a number of reasons, but both the adviser and their customers benefit strongly from the higher standards set. Leaving it to the professional bodies on lower standards will take the industry backwards, not forwards.
I work as a vertically integrated licensee PDM and the suggestion poor advice is covered up by these organisations to cover commercial interests is insulting at best. The most common complaint of the advice businesses I assist is that the licensee forces them to over comply beyond the legislative and regulatory requirements. If Enva feel so at odds with their licensee then perhaps they should seek their AR elsewhere, it is really hypocritical to take a shot at the very business who ensures they are compliant in the first place. Many advisers I speak to consider the professional bodies to be toothless tigers who pursue their own agendas ahead of making advice easier and efficient to deliver and in the best interests of the client. All I can really do is shake my head at this drivel.
This suggestion is just ridiculous but also is symptomatic of life in Australia generally. That is, if you cant meet your responsibilities,expect someone else to do it. Bottom line is that as the holder of an AFSL you have be able to meet your legal obligations which includes controlling and monitoring your staff. If you cannot do this then you are in the wrong business.
Whilst I fully support all advisers being members of a Professional Association. However to suggest that the FPA AFA or some other body should be responsible for effectively the supervision of all advisers is the most ludicrous statement I have ever seen on this site. I make this statement as a director and Compliance director of a boutique dealer group with 14 authorised reps. The Professiona Associations would have to substantially increase their staffing numbers to do this. Enva have obviously never been responsible for the compliance of authorised reps. Time to come into the 21st century on the Degree qualification issue as advice is now far more complicated than when I entered this profession in 1987 and I already held a Bachelor of Commerce degree. If we are to be a true profession then we need to have similar qualifications to accountants, lawyers, doctors etc. To say that advice is “not that complicated” is simplistic and naive in the extreme.
Good thoughts but needs more work. If the Licensee is ultimately responsible for the advice they would not or could not let go of the compliance function. If the Professional Association sets the standards and the Licensees monitors advisers against those standards and then the Association audits the Licensee each year perhaps it could work.
This would be commercially insane wouldn’t it? Here we have an adviser linked to a product manufacturer ( AMP ) suggesting that a Licence holder should have their compliance for their licencee liabilities managed by a 3rd party Association…..? surely its hard to believe that an AFSL holder would agree to carry the liability but the FPA would do the compliance work (which incidentally it is not equipped to do professionally or financially) Likewise it would also have to adhere to the policies and procedures of the AFSL not the industry.
Might be missing the point but then the quote “There is an unhealthy conflict caused by the licencing system” needs a mirror when an AMP adviser under a Charter name chooses not be aligned to a product manufacturing AFSL….. maybe missing the point yet again as J thinks its the most sensible and practical suggestion on the site. Worth listening to a few views
That is the most sensible and practical suggestion I have read on this site. Well done.