Advice industry regulatory bodies need to agree on clear guidelines and examples of what compliant scaled advice would look like before most licensees would be willing to offer it, an industry compliance expert has said.
Forte Consulting Solutions’ Phil Osborne, who presented to politicians including Jane Hume and Stephen Jones in Canberra this week as part of an AIOFP initiative, said previous attempts to blame the lack of available scaled advice services on ‘licensee conservatism’ were ill-informed.
“The advice industry would like nothing more than to have the provision of scaled advice as standard practice to help reduce the cost of advice for consumers,” Mr Osborne said.
“While it might be perceived that licensees are being conservative in not allowing this to occur, the reason for any conservatism is the major concern for whether a piece of scaled advice ends up in front of a body who takes the view that more information should have been given, and that penalties should apply.”
Following the recent announcement from ASIC that it would release a consultation around its current scaled advice guidelines, Mr Osborne said any new regulatory approach had to also involve AFCA and FASEA to ensure advisers were not inadvertently left open to legal action through giving scaled advice.
“We propose that those overseeing the process – politicians, ASIC, AFCA, FASEA – consult with licensees and advisers who are at the coalface to develop a common view for guidance as to what might be, as the Corporations Act already puts it, ‘reasonably apparent’ for adequate recommendation inclusions in an advice document for scaled advice,” he said.
Mr Osborne’s research indicated the initial advice process was now taking an approximate 36 hours of client time from end to end, with SOA production the largest contributor to the administrative blowout.
AIOFP executive director Peter Johnston said the association was regularly engaging with politicians to help them understand how current industry dynamics were contributing to the lack of affordable advice on the market at present.
“Politicians need to understand that any costs imposed onto advisers are immediately levied against their clients – advisers can no longer afford to absorb these costs,” Mr Johnston said.
“Advice costs have tripled over the past five years due to a massive increase in compliance paperwork that needs to be rationalised to eliminate duplication and irrelevant procedures.
“It now costs consumers a minimum of $5,000 to be onboarded with an adviser and similarly with ongoing servicing fees. Consent form legislation will increase this cost to $6,500.
“Financial advice is fast becoming a service only the wealthy can afford.”
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