The paper outlines a model that could reduce the cost of advice by almost 40 per cent (near $2,000) through recommendations that include abolishing the safe harbour steps for complying with the best interests duty and removing “complex” SoAs in favour of a letter of advice.
An analysis of the recommendations by KPMG 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.
Synchron director Don Trapnell said the group supports any initiative that aims to reduce costs and relieve compliance burden. However, he questioned the motives of the FSC and cited its life insurance framework (LIF).
“However, and this is perhaps more of a problem than the FSC is willing to recognise, the question on the lips of many risk advisers is — why should we trust the FSC?” Mr Trapnell said.
“We still believe LIF was predicated on a lie, a lie that a culture of churn existed among advisers when there was scant evidence of it.
“It was championed by the FSC whose members, to this day, are primarily fund managers, superannuation funds and life insurers. Advisers are right to question the FSC’s motives.”
Mr Trapnell also criticised the paper’s lack of recognition to separate risk advisers and financial planners, saying “it doesn’t make sense for them to hold the same qualifications or have to commit to the same educational program”.
Meanwhile, The Advisers Association (TAA) CEO Neil Macdonald threw his support behind the paper, saying it has the potential to deliver better outcomes for both advisers and clients.
“We are particularly pleased to see the FSC’s call for the separation of product and advice,” Mr Macdonald said.
“This would represent a giant leap forward, as in practice it would mean only licensed financial advisers would be able to give financial advice.”
Mr Macdonald said the blueprint comes at an important time for the sector which has endured rising costs and compliance and, in turn, has also impacted consumers.
“The cost of providing financial advice, the onerous review requirements and the application of black letter law in relation to fee disclosure statements have made the delivery of advice too unwieldy and far too expensive,” he said.
“We can and we should do better than this.”
Earlier, Financial Planning Association of Australia (FPA) CEO Dante De Gori said the proposal should be acted on ahead of the government’s implantation of the Better Advice Bill next year which will expand the role of ASIC’s existing Financial Services and Credit Panel to operate as the single disciplinary body for financial advisers.
“With the government’s intention to introduce a single set of standards for the financial planning profession, we believe now is also the time to prioritise the establishment of a principles-based professional and ethical advice model, as opposed to the current ‘tick-a-box’ rules based approach to compliance under the existing regulatory framework,” Mr De Gori said.
Jumping into bed with the enemy. Lets be very clear, the sole purpose of the FSC is to promote the economic wellbeing of its members i.e. predominately product manufacturers and flog more product. The FSC has zero concern for advisers or the betterment of the advice profession. White papers, green papers and policy designs are merely a smoke screen to distract from the FSC members ultimate goal. It is beyond comprehension that any credence is given to the FSC given the vile and despicable behaviour of some of its members over the past ten years or so. Why hasn’t the FSC condemned and banished those members who were found to breach basic ethical standards and decency let alone the law as clearly evidenced during the banking royal commission? Indeed, the FSC breaches its own Standard One by not doing so.
Tick a box? When was the last time Dante gave advice? Or sat through the advice process? Tick a box, geezuz, its not working for the fpa and living off membership fees, thats ticking boxes.
If the fix was that simple. The ones providing this “ simple “ fix obviously have zero idea of how to operate and be a financial planner. Same story, those who don’t know much are offering a fix. No one in authority has spoken to the coal face and certain individuals proporting to represent us – FPA etc have no idea. Peter J, keep up the fight.
What a shame that Garry Crole did not read the actual report.
Leopards do not change their spots, they merely move them around.
i pointed this out many years ago with submissions to the review of the financial services sector. the paper pointed out that going down the path of more compliance would be failure for the industry as they were trying to fix something that was not broken.
The industry should be collaborating with the FSC and not criticizing the past failures, which we all know stem from numerous levels, predominantly in my view from the self interest vertical product manufacturers and advice alignment history. As a CEO of business who supports almost everything that can reduce the cost of advice I felt the FSC report had a refreshing underlying current to the needs of advisers ,the consumer and the ongoing educational , oversight , and profession as a whole.
A lot of people didn’t read the actual report and only the detailed summary provided by KPMG, with most just viewing the web page summary. If you read the actual full report you’ll see a very different picture being painted. If I was an adviser in your network I would be shocked that you’re supporting something that leads to me being obsolete.
How can you support an expansion of intra-fund advice, and continuation of the fees being charged to all members of a super fund?
In the report – “Intra-fund advice should be permitted under Simple Personal Advice and Complex Personal Advice,[b] it should not be defined separately”[/b]
Totally agree with you Garry. Unfortunately a lot of advisers have become so consumed with rage about past bad decisions by associations and regulators, that it’s affecting their judgement and perspective moving forward.
Any wonder
So the AFA & FPA are selling us out yet again.
The LIF reforms were perpetrated on a LIE, which the FSC supported, and then the FPA & AFA told their members that the reforms will be good for the industry. The FSC don’t want Financial Advisers dealing with the consumers, they want the consumers to deal direct with their “Call Centres” and the “White Paper” is just another “CON JOB”. The Hayne Royal Commission put the knife in further and yet again, the FSC, FPA & AFA supported the “reforms” from that hatch it job. FASEA has been a joke from day one, and meanwhile Advisers are leaving in droves. The numbers will be below 15,000 by the end of 2021 and probably as low as 5,000 in 2026 when the next phase of the education requirements kick in. [ and before you have a go at me, I have passed the FASEA exam and half way through the Grad Dip so I will be one of the remaining advisers ].
Insurance new business is plummeting down over 200% since LIF reforms began [ is that not telling you something ], and now the insurance companies are starting to feel the pain with many reducing their staffing levels which then effects their service levels, so the downward spiral continues.
The new FDS rules are an overkill, with most clients wondering why are they having to sign endless reams of paper which all tell them the same thing. Yes, I agree that clients need to know what they are being charged and what services they are receiving for the fees that they pay, but one for the Licensee, one for the platform and one for the Investment manager is a joke, and then to be told that they have to sign the same thing every year on the same date, they are just bewildered by the duplication and overkill.
Well done Don Trapnell [Synchron] and Peter Johnston [AIOFP] for speaking out and all advisers need to add their name to the petition that Peter has arranged, if we don’t then the government [ with the help of the FSC, AFA & FPA ] will continue to shaft us.