Weathering the regulatory storm

Reform has become a constant for advisers over the years, yet the relentlessness and intensity is reaching serious levels. While we’ve been through upheaval, take the Future of Financial Advice (FOFA) reforms, the banking royal commission is different. There was no tinkering around the edges. The government’s commitments in response to the royal commission – the bulk of which will be implemented by mid-2020 – are wholesale.

Beyond what’s grabbed headlines, such as ending grandfathered commissions, are systemic changes including the cross-over between expectations regarding advice regulation and reforms across the superannuation industry. The impacts are going to be profound, including the onerous requirements on super fund trustees relating to the confirmation of annual adviser fees and, in turn, clients having to agree to the fees multiple times. This is likely to have an adverse effect on a client’s experience of financial advice.

Quality not quantity

While the banking royal commission has been valuable in identifying systemic, cultural and operational deficiencies of the past, it has forced our industry to focus on addressing those shortcomings rapidly, and in quite a public way. The quantum and speed of reform has not allowed the industry to properly focus on how changes could impact clients.

Take government as an example. The efficiency of government is not measured by the number of bills enacted, but by the quality and impact of the legislative reform. In the case of the banking royal commission, the government has assured that by mid-2020, more than 50 commitments will have been implemented or have legislation before Parliament. What matters most though is the impact those reforms will have on the industry and, importantly, the broader society.

There’s an undisputed need to get the regulatory settings right for financial advice, but whether it’s government reform or industry regulation, this mustn’t come at a disservice to our clients. It’s critical for the community and it’s critical for our profession that we get the balance right.

Keeping customers in focus

Core to this is focusing relentlessly on the client and their needs. Our complex landscape has become more so, and as a result has seen many in our industry become somewhat introspective. During times of upheaval, the temptation for our sector has been to look inward. While self-reflection is important, we must hold ourselves to account and focus on the most important element – our clients.

When law makers draft new regulation, and when advice businesses interpret it then redesign themselves and their services, we must all pause and address the question of how does this benefit the client? Are we giving clarity, control and choice to clients, or are we confusing them, making it less affordable and accessible and pushing them away?

At a time where the environment is ripe for sound financial advice – think market uncertainty, record-low interest rates and ageing population – how we operate is what will see us through this reform storm.

Matt Brown, executive general manager, Australian Unity Advice