The launch of the FSC’s White Paper on Financial Advice this month has been well received. While it will hard code the philosophy and direction of FSC advocacy for the sector going forward – reform cannot come soon enough.
With the Government’s Review of Advice getting underway next year, and the Australian Law Reform Commission’s (ALRC) review beginning this year – reform of the advice sector is still unlikely to occur until 2023.
The FSC is under no illusion that the pandemic continues to exacerbate the structural deficiency within the advice sector: financial advisers are still leaving, disaggregation of wealth businesses is still occurring, and the number of unadvised consumers with increased assets who may be at risk of poor decisions is increasing.
The Government’s Review, however, will generate the last reforms to our sector for some time. Nothing can be left to chance. It’s exactly why the FSC’s members took the steps they did through our Green and White Paper processes beginning in 2019 to ensure we finished 2021 with as strong a platform as possible for the Government to pick-up and implement.
But what next?
Since the White Paper’s launch, we have wasted no time in pursuing the implementation of its recommendations in 2023-2026 or sooner.
Next month the ALRC will release its First Interim Report, as part of its look at the Corporations Act 2001, honing in on definitions like ‘financial product advice’. This will fire the starting gun on a debate about professional advice and its relationship with financial product. The FSC has, and will continue to emphasise to the Commission, its desire for a definition that is de-anchored from financial product in favour of clear, legislated categories of ‘personal advice’ and ‘general information’ – changes that could reduce the cost of providing advice by 9 per cent, according to research we commissioned from KPMG.
Our cross-sector Quality of Financial Advice Working Group has been developing the themes, issues and expertise we believe the Government’s Review should incorporate. We are engaging deeply with a range of stakeholders who want to work with us in our proposed White Paper reforms that include:
- Reduced documentation and realisation of the Letter of Advice – which would reduce the cost to service clients by about 17 per cent.
- Removal of the safe harbour steps – that would reduce the cost of advice by 9-11 per cent.
- Long-term work on the professional framework.
In coming months, the FSC will also engage the advice sector on the specific issue of ‘regulatory uncertainty’ – the disconnect that persists between regulatory intentions and regulatory enforcement practice indirectly undermining the relationship between licensees and advisers, driving up costs, and preventing innovative, high quality advice solutions and best practice.
Our work in the next year will lay the groundwork to achieve the removal of the safe harbour and the introduction of the Letter of Advice while expanding this lighter touch regime to 275,000 more consumers, thanks to our recommendation to increase the asset test for wholesale investors from 2023.
The FSC will continue to work constructively with the entire advice sector. Doing so is changing perceptions, building trust and ultimately providing a strong voice for thousands of advice businesses and professionals.
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