On a new episode of the ifa Show, the dealer group’s general manager of compliance, Phil Osborne, discussed a recent opinion piece written for ifa in which he called for “evolution, not revolution” in the financial services industry and for the sector to work with the legislation put in place instead of trying to overhaul it.
“The legislation is not onerous. It’s what we’ve done with it over a period of many years…” Mr Osborne said.
On the podcast, Mr Osborne said the documentation in advice has grown rapidly over the years and recalled reviewing files back in the mid-2000s which he called “the donut file” in which a fact find was completed for a client who would then get a statement of advice.
“But you’d look at the file and say, ‘Well, okay, where’s the due diligence? How did you actually determine that what you’re recommending is what’s actually the best thing for the client?’”
“One of the things that we’re seeing is that over time, all of these extra things that have come along, and it’s now a case where people might move from one licensee to another, because a licensee has determined to say, ‘Right, this is what we want in these documents.’ All of a sudden in the head of the adviser it’s, ‘Oh, that’s compliance. And that’s the legislation that’s actually telling me I’ve got to do that.’ It’s not actually the legislation that’s saying that, it’s the licensee’s interpretation of what they want to be able to say.
“I go back to my experience dealing with ASIC on a couple of issues over the last few years and you actually say to them, or I have said to them in the past, ‘Well you guys are the ones asking for all of these extra things to be going into it.’
“And they push back really quickly. They say, ‘No, no, no. If we ever assess a file, we assess the file. We don’t just say right, what’s in the statement of advice.’”
Earlier this week, wealth manager WT Financial Group announced the acquisition of Synchon; a move that will see it become the largest non-institutionally-owned financial adviser network in the country.
Listen to the full podcast with Mr Osborne here.
Phil has just alluded to one of the problems, licensees. They all interpret things differently. Compliance should be standardised across the industry through an industry regulator, with the same soa templates, research requirements, advice processes etc, so that every practitioner is on the same page. Then we can do away with AFSL’s and reduce costs. The same industry regulator (with a board of practicing advisers) should then take on the responsibilities of AFCA which hopefully creates some fairness and reduces PI costs.
Given that the majority of advisers work via a corporate AFSL (as opposed to their own AFSL) and so are subject to the “compliance” regime as determined by the Directors of that AFSL, I would suggest that it makes no practical difference what the ASIC interpretation of legislation is – the RM of the AFSL makes the decision and THAT is the rule-set the adviser must operate under.
So if the AFSL decides that “their” SoA looks like “this” and must contain “that” and must display “these” then that is exactly how the adviser must present the SoA. Therefore the “ASIC” rules (as interpreted by that particular AFSL) are REAL to that adviser.
I have dealt with many specialist compliance advisers, AFSL solicitors, AFSL service providers and so on. Ask ONE question of each them (obviously the same question) and they will each interpret it differently and give you a different “this is how ASIC will see the issue” answer. Throw in fund manager interpretations and you may as well not bother asking the question in the first place – there will be little to no consistency in their answers.
But ultimately the reason for the variation in understanding is that the people at ASIC have created a set of RG’s that are always wishy-washy and unclear. Their own SoA examples are so poor that – if I were to present any of them and find myself defending that SoA to ASIC – I may as well not bother in the first place. Better to have NO documentation that an ASIC SoA.
Dumbfounded..I find this opinion so frustrating and out of touch with reality and I really pity anyone in this network. Interesting given the network of licensee’s he belongs before I left had an eight page Fee Consent letter, and required 3 different signatures to pay a Fee. It’s nut’s like this that are part of the problem and no wonder so many are calling for the AFSL structure to be reviewed. BAD legislation is the problem and dealing with multiple layers regulatory bodies that is the problem. I’m off dealing with multiple Super funds that all have a different processes and requirements to get a Fee Consent signed.
Well of course he would say that. If the BAD LEGISLATION is fixed, we won’t need as many of these Licensee compliance people. Last time I looked, there were no licensee compliance leeches in the medical profession, accounting profession or legal profession. So why are we paying massive fees to fund them?
Old Risky Loves you Giggity …. come on guy lets storm the bastille !!!! enough is enough. AFSLs need to go
Phil’s perspective is conflicted. He has a stake in AFSLs continuing and compliance. Reality is we need to make industry professional and operate under a fiduciary duty in a similar way to legal practitioners or we will never be able to advise properly. Get rid of the AFSLs that leech off the industry – they were the ones that caused all the poor advice in the first place and then the advisers were hung out to dry for it. We cannot afford these people. Get rid of them.
Phil’s perspective is correct in that legally advice should be “concise”. We all know this is impossible to comply with and also comply with all the other legislative requirements and AFCA precedents though. I’d love to hear more from Synchron on recent AFCA experiences and their views on how AFCA determinations impact the length of advice documents. Every ruling against advisers adds to the compliance list of things to include in the next audit. AFCA needs to be bound by the rules of evidence like a court is. They also need to be bound by their own precedents. After the initial stage if AFCA finds against the client, clients should have some jeopardy if they wish to continue with their complaint. And… when cases amount to hundreds of thousands of dollars advisers should have the right to courts to appeal. The levels AFCA deals with without proper rules of evidence are making PI Insurance a problem and SOAs grow and grow. Yet there appears no appetite to even look at this issue as a major causation of massive advice documents. This in turn is driving adviser’s out of the industry in huge numbers due to escalating costs.
I vote you in charge James22. Very well said.
James22 your response has completely hit the nail on the head. I am always dumbfounded when I read the multitude of articles debating all of the varied reasons why the SOA is such a major contributor to inefficiencies in the advice process and yet nobody wants to talk about the elephant in the room. The current system of dealing with client complaints is woefully inadequate in weeding out the vexatious from the genuine, with the Adviser behind the eight ball before they even start. I am aware of many firms who will just throw money at the client to go away (even when they are aware the complaint is unfounded) because they know if it goes to AFCA they will spend huge amounts of time and resources defending themselves against a system that is client centric without any nod to the law or precedents. You don’t have to be Einstein to work out what the issue is here……
And to make matters worse, AFCA actively advertises to encourage vexatious complaints. AFCA is a rogue regulator that is compounding the consumer protection problem, not improving it. It should be removed from financial advice regulation entirely. Financial advice already has more than enough other regulators.
when legislation becomes overly prescriptive, and is then backed up by “hard” law, even the smallest ambiguity is magnified along the line. I have no doubt that Mr Osborne’s factual comments are correct, but implication that the current state of affairs is due to over-reaction by industry is simply incorrect. Everything begins with the legislation. Hard law enforcement following the Hayne RC means that lawyers are now running our industry, meaning that latitude to implement “soft” law pragmatic solutions for day to day matters does not exist. This won’t be resolved until we can get the destiny of the industry determined by pragmatic industry guidelines rather than viewing everything within a rigid legal framework. We’ve got a long way to go on this – the latest Government appointee to help solve the advisory mess is once again … wait for it … a lawyer. Surely it wouldn’t be too difficult to appoint someone with industry expertise rather than legal expertise.
At first advisers were confused and now they are just perplexed…!
Come on Phil, I can see where you are trying to come from……but
But reality is that ASIC’s REGs interpretations of the laws are so crazy BS over the top rubbish of such volume no one can actually do it simply.
Then we have AFCA that will kill an Adviser at almost any chance and they don’t even care if the Adviser is trying to do the right thing or if it is normal market volatility causing issues. The clients can lose, complain again, lose, complain again, lose and still yet again complain until AFCA agree to find a way to pay them to shut them up.
Let’s have ASIC do a full advise SoA.
Let’s have ASIC do multiple limited SoA’s.
Previous attempts from ASIC failed miserably.
Let’s have AFCA follow real court rules, not a Kangaroo Court system and limit the right for ongoing appeals from the clients when they lose. Or if they want to keep fighting then the clients pay to fight.
Let’s have ASIC charge some Institutional Managers for their crimes and not just lowly Advisers.
Reality is Phil, it is incredibly onerous.
So, it has nothing to do with the gap between legislation and a regulator who offers limited real world guidance on how to actually comply, essentially leaving it up to each licensee to interpret which potentially leads to overkill to avoid the heavy hand of the regulator?
Gotta like Phil and his perspective.
Good broad Industry experience, qualified x3 and current as an Adviser on the FAR (so must do what an Adviser does inc passing the exam).
Most Senior Compliance people of Heads of Advice aren’t batting even 2 of those 3 credentials that he holds.