Compliance and the needs of licensees are being prioritised over those of consumers under the current regulatory regime surrounding financial planning, according to the SMSF Association.
The SMSFA Association has released its submission to the Australian Securities and Investments Commission (ASIC) affordable advice regime and has strongly criticised the manner in which barriers have been placed in the way of making advice more affordable.
It said the current regulatory system was failing consumers with an outdated compliance regime, impost from licensees and the manner in which scaled advice was being handled.
SMSF Association chief executive, John Maroney said that many of the problems could be addressed at an overarching level by improving the quality of regulation and guidance that governs the provision of financial and tax advice, including minimising the burden of regulation on businesses and individuals.”
He noted that the SMSF Association submission had listed eight factors inhibiting a better regulatory advice model: compliance costs and levies; licensees creating a significant extra layer of compliance and costs; lack of clarity on how scoped advice can be provided; compliance advice documents that are not fit for purpose; ASIC’s image; guidance often not understood or read; the failure of the limited licence framework; and a regime that doesn’t support strategic advice.
“The SMSF sector could benefit greatly from the introduction of ‘strategic advice’ that could be an integral part in developing a far more consumer-focused financial services regulatory system,” he said.
“The current regulatory system makes it very difficult for SMSF trustees to obtain the limited SMSF advice they require. We believe every effort should be made to implement ideas and changes, even where improvements may be difficult to fit into the existing framework – and strategic advice is central to this.”
Maroney said the growing interest in strategic advice had evolved because many consumers want that sort of advice rather than advice on specific financial products. Additionally, with comprehensive advice out of reach for many Australians due to cost, it is clear more are seeking piece-by-piece strategic guidance.
“With improvements to the way limited advice is offered out of CP 332, strategic advice could be the foundation on which a consumer-focused framework is built.
“This could ultimately allow appropriately educated advisers registered with the single disciplinary body to provide strategic advice on areas such as superannuation, retirement and cashflow without specific reference to financial products.
“A strategic advice model allowing suitably qualified professionals to practise under a ‘no product recommendation’ environment would see advisers given increased ability to provide strategic advice without conflicts of interest. It would also address the false perception that financial advice is simply ‘selling products’ and in time would help to address the issue of trust in the sector.”
“A reimagined advice framework has the opportunity to be beneficial for all Australians. It will include more advisers in the profession, less regulatory impost, greater strategic advice and more accessible advice which is more affordable for consumers.”