Clear up uncertainty: AFA, FPABY JAMIE WILLIAMSON | FRIDAY, 17 JUN 2022 12:43PM
Read more: AFA, FPA, ASIC, Association of Financial Advisers, Financial Planning Association of Australia, Quality of Advice Review, Sarah Abood, AFCA, Records of Advice
Both the Association of Financial Advisers (AFA) and the Financial Planning Association of Australia (FPA) have used their submissions to the Quality of Advice Review to call for regulatory certainty.
Releasing their submissions yesterday, both industry bodies have called out the pressure that regulatory uncertainty is placing on the advice industry, as well as the impact it's having on the accessibility and affordability of advice.
"Our overall objective in terms of regulatory uncertainty is that an adviser and their licensee can have confidence that the advice that they have provided in an efficient form today will be assessed as compliant no matter whether it was assessed tomorrow or in five years' time," the AFA's submission reads.
The association said this involves pulling some "key levers", including better enabling the defining of the scope of advice, and specifically enabling limited scope advice.
"Uncertainty about the ability to provide limited scope advice is a contributing factor in the low level of uptake. This reflects a combination of issues with respect to what is expected to comply with the Best Interests Duty (BID) and the uncertainty created by Standard 6 of the Code of Ethics," the AFA said.
The group said advisers are also uncertain as to how much client data they need when providing limited scope advice to meet the BID. There should also be limits applied to ASIC's ability to "mandate obligations that go above the law through either legislative instruments or regulatory guidance", it said.
"If work is done to address the issue with regulatory uncertainty, we would not like this to be undone or to have it creep back in through the intervention of ASIC in an unconstrained fashion," the AFA said.
Other levers cited include greater certainty on the use of Records of Advice; clear articulation of the requirements for BID compliance; clarity on requirements for consideration of alternative strategies and products; certainty enabling shorter advice documents; and increased certainty with how AFCA will judge complaints.
The AFA also called for the introduction of a public forum for resolving regulatory uncertainty issues.
"At present there is no mechanism to address issues with regulatory uncertainty. In the tax world, there is the option to go to the ATO to ask for a binding tax ruling. In the advice world, often when a licensee approaches ASIC, they will be advised to get their own legal advice. If a licensee refers to a compliance specialist, they might get different answers," the AFA said.
"There is no forum that is available to seek out consistency and certainty. We are arguing for some publicly available mechanism to obtain certainty or alternatively to have a regular forum between ASIC, the associations and licensees to resolve matters of regulatory uncertainty. We would also recommend a forum to assist the compliance consulting community to understand ASIC's expectations."
The FPA said similar in its submission, with chief executive Sarah Abood saying: "For example, many licensees and product providers are currently going above and beyond the legal requirements to reduce their risk, due to uncertainty about how laws will be interpreted. However those additional requirements have to be delivered by planners who are by and large small business people with little ability to absorb the increased costs."
The FPA's recommendations include "exempting some simple strategies from SoA requirements, consolidation of advice fee authorisation requirements, aligning the CPD year with the Financial Adviser Register registration/renewal period or with the financial year, and the temporary COVID-19 relief measures to be made permanent."
Abood said: "To continue delivering services to clients, planning practices must be financially sustainable, and we need to turn around the current decline in planner numbers."
"Our profession must be investible, insurable, and attractive to new entrants."
In addition, the FPA used its submission to once again call for financial advice to be made tax-deductible.
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