Many of Australia’s best and brightest minds in financial services gathered online to help shape the future of financial advice this week.
At the FSC’s Future of Advice Summit, leaders from government, regulatory bodies, and industry discussed how to build a simpler, less costly system to provide affordable and accessible financial advice for all Australians.
ASIC Commissioner Danielle Press spoke for many at the conference when she described what a simpler, less costly industry might be like: “It’s where the advisers are trusted to use their professional judgement. Where the advice process is not over-engineered by potentially overly-cautious licensees because they distrust their advisers. And it’s an industry that works sensibly in [collectively] articulating some of things that we need to see improve.”
MLC Group Executive Advice (Acting), Geoff Rogers, added: “We would say [the future industry] definitely has to look differently to how it does now. From a client’s perspective, they want access to the right type of advice – when they want it – at a price that they’re willing to pay. And that is happening in some cases and it’s not happening in others. So we’ve got to improve that and make it simpler.
“And from an advice provider’s perspective, it is very costly to provide advice,” said Rogers, explaining that the costs were not solely caused by regulation but also by other factors such as the cost of digitalisation, the cost of doing business, and the increased cost of professional indemnity insurance.
Vision for the future of advice
Discussion at the Summit was informed by the new Future of Advice report, commissioned by the FSC and prepared by Rice Warner. The report tackles the biggest issues faced by the industry of today and reimagines how it might look tomorrow. Recommendations include new principles for advice (e.g. simplification, consistency, affordability, accessibility, quality), simpler categories of advice (e.g. general information, simple personal and complex personal advice), reduced documentation and easier compliance.
Commissioner Press said that technology can help achieve a simpler and less costly industry, but that automation should not replace the important contribution that advisers make. “I think technology has to be an ‘and/and’ conversation,” she said. “It’s not an adviser or technology. It [needs to be] an adviser and technology. They have to sit together. The real value of advice is that personal connection; it’s the counselling, it’s the estate planning. That piece is important to customers and the delivery of that is very difficult to do through a technology platform.”
Commissioner Press added that technology had the potential to simplify processes and improve customer experience, while assisting advisers to collect, record, evidence and articulate the advice process to simplify regulatory compliance. AMP Australia’s Acting Chief Executive Blair Vernon agreed. “I’m viewing technology as the thing to take friction out of our compliance complexity, not as a solution to the art of giving advice,” he said.
A commonly expressed sentiment on the day was the need to cut red tape. Nicole Salimbeni, Partner, Financial Services and Consumer Business Leader at PwC Australia said the current regulatory context “is almost unworkable” and that while change may be hard and complex, the Future of Advice report pointed the way towards simplification. “To me [the issue is] just the layering of regulations, some of which are decades old, and we have to remove some of that to make it easier to understand and implement.”
Assistant Minister for Superannuation, Senator the Hon Jane Hume, sounded an optimistic note on the prospects for regulatory reform. “Not only do we have a Minister for Deregulation in Ben Morton, who has been quite focused on this area specifically but also, now that the COVID-19 recovery programs are out there and the budget has been delivered, the Treasurer is turning his attention to this very area. We know that is a priority. We want to ensure that as many Australians as possible can get good quality financial advice and access to it.”
Minister Hume also provided some post-Royal Commission updates affecting financial advisers. Legislation for the establishment of a single disciplinary body for financial advisers “to streamline and encourage greater professional discipline in the industry” should be introduced by mid-2021, she said. And legislation to establish a forward-looking compensation scheme of last resort is also scheduled to be introduced by mid-2021.
While emphasising that more remediation work still needs to be completed by some in the industry, Commissioner Press struck a conciliatory note too: “As a regulator we have a role to play when we are looking at past conduct [to] make it clear that it is past conduct. That doesn’t mean that we can walk away from it but we can make sure the narrative is about what’s happened in the past and make sure we think about the improvements that we're seeing now and into the future. That helps build trust and it helps build social licence to operate.”
One industry, one voice
Taking the momentum from the Summit and the Future of Advice report, the FSC will now develop a policy consultation document to be published in 2021. Reflecting on this process, AMP’s Blair Vernon said: “The report highlights that people value interaction with advisers to get help in this complex area. So setting aside what we want from regulators, government and technology – actually what we need to do is keep a vibrant community of advisers out there who are able to help Australians get on with this tough topic. Advisers do great work, I appreciate there is the odd challenge, but they are there to help and they want to help. So we’ve got to figure out how to coalesce around that and deliver more advice to more Australians.”
In line with Vernon’s sentiments, both Senator Hume and Commissioner Press encouraged the industry to speak with one voice to government and regulators. “If out of this process you can come up with ‘yes we all agree we need to change the model’ then [that requires] a conversation with government,” said Commissioner Press. “Or [instead it might be] what are the five or six bite-size things you actually need government to do here to move it forward. If you can get some alignment on that and some real clarity on what the industry needs, then I think there is a supportive regulator and government. The opportunity is [here] now but the industry has to speak with one voice, not with 15 different voices all pulling in different directions.”
The Future of Advice
The FSC will be reviewing Rice Warner’s Future of Advice report and engaging extensively with stakeholders, including Australia’s financial advisers, ahead of launching a policy document (or ‘green paper’) on financial advice next year. FSC members are encouraged to read the Future of Advice report and provide their feedback to the FSC.