Helen Baker, licensed Australian financial adviser and author, believes the Quality of Advice Review (QAR) fails to deliver recommendations that would bring meaningful change.
In a recent opinion piece published on ifa, Ms Baker said the QAR proposes yet more compliance on advisers, which in turn could drive up the cost of advice and further restrict accessibility at a time when living costs and interest rates are already hurting.
“A more balanced approach to regulation is required, to protect consumers without driving up advisers’ training and compliance costs (which, for advisers to earn a living themselves, are passed onto clients),” Ms Baker wrote.
Speaking to ifa, she explained even elements of the QAR perceived as unburdening may in practice yield minimum change. One of these is the recommendation to scrap statements of advice (SOAs).
“If I look at our licensee, for example, we have to do a lot more. So, where there are some things where you could just do an ROA, we’re having to do an SOAs, we’re having to do extra documents that you wouldn’t have to do under other licences or if you were self-licenced. It’s going above and beyond what’s required,” Ms Baker said.
“So, there are still issues around, if things were decided would licensees actually implement them or would they still keep that protection heightened for protecting against professional indemnity, claims that can happen in the future.”
In her eyes, a “more balanced approach” would be lowering the number of CPD hours advisers are required to complete per year.
“We have to do 40 hours per year, and I think every adviser wants to do the right thing, and we need to learn, and all of that is fine, but these added pressures of having to do that many hours, when a lot of the things we’re doing don’t count … We can end up doing 75 hours, that’s a lot of time being away from in front of clients, which is adding to the cost of the bottom line,” Ms Baker said.
“The more time you’re not in front of a client, the more time you have to account for covering all the fixed costs that we have.”
Touching on the amplified role the QAR is suggesting for superannuation funds, Ms Baker said while she is not entirely opposed to the idea, she does have a number of concerns.
“It’s a tricky one. In a sense, we’ve gone through all this heartache, and the pendulum has swung all the way over here, we’ve gone through horrendous times… In some ways, we’re almost coming back to where we started,” Ms Baker said.
“So, on a positive front, I think people being able to deal with their superannuation fund with queries they have, that’s fine, as long as it’s really limited, and not complex situations,” Ms Baker continued.
“But they can only talk about their super fund. They can’t suggest you go with another super fund and my biggest concern is around this consolidation of super funds. There is a lot of noise constantly about consolidating funds, and there is not warning to the everyday person that once you consolidated you’ve lost your insurances … I wonder if the everyday consumer will be protected from making a mistake.”
Last month, Financial Services Minister Stephen Jones indicated he was leaning towards heeding Ms Levy’s recommendation regarding super funds.
“There are 16,000 licensed financial advisers in the country, so the numbers don’t square. So, we’ve got to find a way to deliver information and advice to members who are approaching retirement,” he told an Industry Super Australia event.
The advice community has been patiently waiting for Mr Jones to deliver the government’s overall opinion of the QAR for several months.
Last week, the minister announced he should formulate a response to the QAR by early June.
“We will have a cabinet consideration in a few weeks’ time. I hope to be in a position in late May or early June,” the minister said.
He also predicted that the review could be implemented in several stages.
Namely, according to the minister, under the initial stage, the government would implement those more immediate recommendations, followed by the more controversial elements and then it would tackle the most difficult areas.
My view is licensees are driving the cost of advice not CPD hour requireemnts. Licensees are paid very well to be overseers of professionals who are being baby sat for the errors in the past. A licensee arrangemnt where they are a listed enity making money for shareholders, doesnt seem right. Are there listed medical and accounting third parties making money for shareholders driving up the costs in those industries? Are Drs needing to be told what medicines they are allowed to recommend? $40k a year to a lciensee before paying for software,Pi and rent is a bloody big lick of the ice cream in this world of eductaed finacnil planning professionals…
Governments role is to dictate the minimum requirement. If you as an adviser choose to work under an AFSl that requires you to go above and beyond this, then that’s your choice.
Of course removing the SOA won’t remove all paperwork (just as doctors need to keep their records), but it will free us up to provide them the information in a way we believe is best for them, and not be hamstrung by Government regulations.
As for CPD, I fail to see how doing 40 hours a year (or spending 2.5% of your time) is excessive. The issue is more the value it adds as many of the CPD accredited courses/subjects are meaningless and just feather the nest of the many education providers.
How is the view from the Ivory Tower – you reference to notes “just as doctors need to keep their records” is a world removed from the red tape of Financial Adviser notes.
Financial Adviser should keep notes just like Doctors – that way Financial Planners could see 4 clients per day every working day – all problems are them solved. I love your comparison – works well – lets bring that example forward through the appropriate channels.
“Governments role is to dictate the minimum requirement.” So, Product employees providing Advice need no qualifications but all other Advice must be delivered via a qualified Financial Planner under BID? Is this really Governments role?
There is nothing wrong with an SOA as required by ASIC under RG175. The issue is that RG175 is not followed by anyone. Every review done of financial planning increases compliance and the cost to the consumer, this one will end up no different and anyone who expected otherwise is a fool. Incompetence to this level can’t be accidental.
If the licensee doesn’t implement changes that are allowed to enable advice to be provided efficiently, then the problem is the licensee, not the law or regulations.
The point about CPD hours is relevant. Any conscientious adviser is continuously reading and learning as a matter of course. The ridiculous public servant set topics and method to pay for, achieve and record CPD points is just pointless bureaucracy.
The government IS the enemy.
This adds 0 value and Helen should change licensees if they’re overly litigious. No amount of regulation will fix that. Legislation should address minimum standards not direct every movement of a company, if her licensee is insisting on extra, change or go self licensed
I can see where this is going.
Industry funds allowed to provide advice on their products with minimal documentation.
& that’s all folks.
Everything else is too hard
There is nothing hard about it. Only 3 simple steps required:
1. Scrap outdated dealer groups who are drowning and pulling us under
2. Implement Levy’s plant to streamline consent, do away with SOA’s and FDS’s
3. Bring back FASEA, but this time with a board which has 2/3rds practicing, experienced financial planners and give them the power to oversee all financial advice regulations, including the Code and disciplinary body.
In other words, put us on the same footing as other professions.
It won’t happen because powerful vested interests want to squash us to they can sell direct to the public. But the solution (if any politician is brave enough) is not hard at all.
I disagree, Helen. CPD hours should be increased and SOAs limited to 3 pages. This would also limit an opportunistic AFSL from weaponising a SOA against an adviser.
How would it be possible to reduce an SOA to 3 pages?
For specialists in the financial advice industry, CPD is a joke. The quality of online material is relatively poor and apparently produced cheaply. As a risk only specialist, why should I have to get four points on financial planning when I do not advise on anything to do with financial planning and refer always to a specialist. What I was looking for is more units on ethics (try finding those), more on estate planning theory, more on understanding how insurance products actually work and most importantly the development of alternative strategies. Can I find those – not on your sweet Nelly
And I don’t want to abandon SOA’s but I do want something that is about five pages maximum and tells the story.
A sensible article, but I dispute this comment – ‘There are 16,000 licensed financial advisers in the country, so the numbers don’t square’. I’m surprised no-one has challenged this falsehood. It keeps getting repeated like it is a fact. If we were allowed to operate like other professionals, there is no reason why a financial adviser couldn’t meet with 3 clients a day, 4 days per week. For 16,000 financial planners working 46 weeks per year, that’s 9 million client appointments every year. Many of them would be couples, so in theory we could provide an annual review to around 13 million Australians. Of course not all Australians want or need financial advice, and many don’t need an annual review. I would argue we have an potential oversupply of financial advisers considering our population size. The problem is red-tape and compliance, not the supply.
Very true. Seems many people simply believe the first thing they are told or just don’t have the intellectual capacity to challenge what they are told – so I can see why people keep making claim – if they believe it keep telling them the same sh88t. I believe Michelle Levy also made the same claim – but I guess she knew she was never going to make the life of the qualified Financial Planner easier – seems however she did find a way to keep the product manufactures happy – and Financial Planners away from their FUM?
Michelle Levi has already stated her recommendations that will benefit real advisers are unlikely to eventuate due to the practical hurdles of implementing them. She stated Super funds won’t be able to agree on Fee Consent forms and as for a shortened SOA she said it won’t meet all of the industry requirements eg PI providers etc. Let’s remember advisers have about 11 different Government regulators and bodies and the current Government just announced three more board levels for the RBA. In the last budget established a variety of review panels. Labor Governments like regulatory intervention, red tape and creating more public servants. What we’re asking is the complete opposite. The only certainty that will get legs is making it easier for Union Super funds to provide advice.
there is absolutely no enjoyment, no direction provided here, my hands are tied, why do I bother if the powers that be don’t care enough ?
Helen is correct. QAR is primarily for the benefit Super Funds & their inhouse intrafund advisers, who enjoy the luxury of not having to chase up bureaucratic red tape Annual Fee Renewal Consent Forms. QAR is designed to get rid of even more retail advisers. If we were serious about reducing costs for consumers and dealing with the 1 million orphans languishing on the investment platforms, we would get rid of the Annual Fee Consent forms (that do not exist in any other nation on earth). We would also get rid of PI insurance as a condition of ASIC license renewal, as it once existed. Consumers cannot access cost effective adviser service support due to massive Govt red tape imposed at every possible level. Enough is enough.
It is not the licensee that would require you to do the SoA, more the PI insurance companies. They are the ones pushing up the costs. Let’s be frank about this – the PI Insurers want to be protected and not to have complaints made, and therefore, find anything to ensure that they are protected in this. Therefore, the licensee needs to comply otherwise they cannot get the cover. Let’s not blame the licensees or the advisers. Dig deeper.
Most advisers would be looking forward to the response from Jones about as much as being poked in the eye with a stick! A stitch up is on its way…