In a new white paper, the peak body has outlined a framework that could cut costs by almost $2,000, which FSC CEO Sally Loane has said the government must consider now.
The paper recommends raising the threshold under which clients are identified as retail clients with those with assets of less than $5 million, abolishing the safe harbour steps for complying with the best interests duty and removing “complex” SoAs in favour of a letter of advice.
The FSC has also called on the industry to move to sustainable self-regulation by 2030.
“The financial advice industry has reached an important milestone: it has become a profession. It is time the government modernised the current complex and costly regulatory framework to recognise and respect the professional judgement of advisers,” Ms Loane said.
“Current regulations prescribe compliance obligations at every step of the advice process. They are an unprecedented driver of cost for financial advisers and consumers, and are past their use-by date.”
KPMG’s analysis of the FSC’s recommendations found that the cost of providing financial advice would be reduced from $5,334 to $3,466, would save advisers up to 32 per cent of time when dealing with clients and allow them to provide advice to an additional 44 new clients each year.
KPMG also said the time required to complete the advice process would be reduced from 23.9 hours to under 16.8 hours.
“Long term, the FSC’s reforms could generate cost savings for the advice industry of $91 billion over 20 years,” Ms Loane said.
“The FSC has welcomed the strong support and constructive feedback we received from the advice industry, consumer advocates and FSC members.
“Having led this debate with our green paper in April, we now want to see the past few years of significant reform and professionalisation of the sector rewarded with a regulatory framework that trusts advisers’ professional judgement.”
I now enjoy reading these comments as part of my post advisor life. It’s been six weeks since I ceased being a financial planner and my husband says I am just a different person. So much less stressed.
I did spend a few years planning the move as the compliance pile on became laughable. But amazingly I seem to have replaced my net income within weeks. (Far fewer overheads).
Bottom line, no matter how much anyone tries to justify what’s gone on over the last few years, it’s a disgrace, with a whole lot of professional, well intentioned, good people sold up the river. I wouldn’t believe the Kafkaesque downward spiral that was over regulation could have happened if I hadn’t lived it.
There is not a politician in Australia who will justify getting rid of “Best Interest Duty”. Imagine the political fallout that would cause.
The FSC are simply trying to get their members back in financial advice via call centres and general advice — realistically they have done advisers over for at least a decade and will keep doing the bidding of the big companies who pay them.
The FSC has never suggested getting rid of BID. They are recommending getting rid of Safe Harbour, which is a complex and bureaucratic way of proving BID. Unfortunately Safe Harbour has become a defacto standard for overly conservative, box ticking, compliance departments and regulators. It adds to the cost and complexity of advice, while detracting from greater use of professional judgement.
BID was recently introduced for mortgage brokers, but associated Safe Harbour provisions were deliberately omitted after seeing the negative effects it has had on financial advice.
You can see the FSC are starting to panic. It wasn’t long ago they were quite happy to destroy the advice industry with the LIF for example so that their members could sell more junk direct insurance and quite happy for banks to drive the market too. The Royal Commission put paid to all of this and the FSC members are in a panic over how their policies have backfired on them and advisers are leaving in droves and business is tanking too
Irony – When the head of the FSC, whose full members include companies like NAB, AMP, IOOF and Dixons start calling for ways to reduce the compliance burden. Aren’t these the same companies that were responsible for the fees for no service scandal, charging people for junk insurance, getting clients to invest in their own underperforming investments (which they can’t sell)…..
I am all for reduced regulations, but Sally maybe you and your members should spend more time on being more ethical so the rest of us aren’t penalised.
it’s WTF moment – so the FSC who were warned for many years not to go down the path of destroying the FP profession – suddenly decide to come up with a “cost reduction – profession saving” document.,.? Certainly too late. Seems like the intended consequences (getting rid of advisers) has worked. :roll::roll::roll:
I don’t understand the complaining in the comments here. These are practical recommendations, which would benefit advisers & consumers.
SOAs are outdated. [u]99% of clients DO NOT read them, AND they do not protect the consumer (or the adviser!)[/u] When you combine them with PDSs & ‘fact sheets’, it is ‘disclosure’ overload….1,000s of pages which no client ever reads.
Let advice firms & advisers illustrate the strategies and advice however they like (powerpoint, video recording, whiteboard etc.). There should only be a short document which outlines the critical disclosures relating to the products involved: Product Costs, ‘Disadvantages’ or ‘things to know’ where there is product replacement. All this should only consume a couple of pages. I would like to see a standard length & format for this document, so that Licensees don’t get carried away like they have with SOAs.
Advice fees are over-disclosed currently and do not need to be in an SOA, we already have: Annual Advice Agreements or FDS, FSCG, Initial Engagement Letter.
It isn’t so much the recommendations. Its more the fact they are coming from the lobby group whose members were responsible for the current predicament we find ourselves in.
This is the same FSC that during the LIF negotiations repeatedly made calls for the potential abolition of insurance advice commissions and made very clear recommendations to John Trowbridge.
The same FSC that up to their eyeballs in the relationship with the failed and flawed Kelly O’Dwyer.
Disgrace.
Totally agree on lifting the “sophisticated investor” criteria from $2 million to $5 million (or more).
Though there are two ways of looking at the “Sophisticated” / “Wholesale” investor issue. One being I haven’t met many with under $30m who could actually be termed “Sophisticated” if that is supposed to take into account financial and/or prowess/understanding. Next is the issue of why should someone receive a more seamless, efficient, timely, inexpensive financial service just because they have more money than the lawyer on $200k pa who still must pay for and receive copious amounts of paperwork just to rollover his $10k Sunsuper from his part-time KMart days into his SMSF? Why not treat everyone equally with either the Wholesale approach, or some hybrid – just not the ridiculous time consuming retail method. Then there’s the whole issue of Dealer Groups these days, with many choosing not to have a Wholesale policy thereby forcing Advisers to treat every client as Retail whether they are or not.
I’m sure face to face, and human lead advice and advisers like myself will be around in 2030 to reap the rewards…NOT…in the interim we just need to survive stock market crashes, deal with an anti adviser ASIC and an anti adviser Treasury and finally the Labor party that will likely return to power and make the only source of advice Hesta.
…with Barefoot being the only adviser left in the industry other than Tik-tok?
Pardon me Sally…..but I have always considered my industry and services a ‘profession!’
Clearly then, the FSC should not be representing our industry having failed to understand this.
Getting rid of Hayne2 is the best way to reduce the cost of advice for smaller investors
The FSC only looks after its members being banks, never trust someone who has previously stabbed you in the back.
If a message is coming from the FSC it’s just promoting a way that the banks can get back in to advice – ie reduce the cost to serve so they can exploit their customers again with just a letter of advice. They don’t represent advisers just institutions.
100% correct, not 1 single FSC board member sits on an AFSL Advice Group
Forgot to mentions the green paperwork calling for intra fund advice to be opened up for full advice areas for intra fund advisers. just get advisers and charge fee for service