The Financial Planning Association of Australia (FPA) has supported proposals to make financial advice law and regulation simpler which will support the provision of sustainable and accessible financial advice to more Australians, in its submission to the Australian Law Reform Commission’s (ALRC) Review of the Legislative Framework for Corporations and Financial Services Regulation – Interim Report A.
Sarah Abood, CEO of the FPA, said the submission focused on reducing the immense regulatory burden felt by its members and the broader financial planning profession.
“The FPA supports the ALRC proposals to make financial advice law and regulation simpler through a consolidated “rules book” for financial advice. This approach would help improve the affordability and accessibility of financial advice for more Australians,” Ms Abood says.
In its submission, the FPA highlighted the regulatory and oversight challenges facing financial planners, in addition to the complexities created by the Corporations Act which the ALRC has already identified.
“The financial planning profession doesn’t need more regulation, it needs better regulation. Financial planners are required to interpret a never-ending list of contradictory requirements placed on them. To ensure compliance, planners are required to comply with four laws regulated by eight regulators with additional oversight from Australian Financial Services Licensees and professional associations and additional consumer complaint mechanisms through two ombudsman services and the courts.
“This all comes at the cost of providing clear, concise, efficient and affordable advice to ordinary Australians who need it most,” Ms Abood says.
“We believe this creates a significant risk. Financial planners are not lawyers, but it may be that the regulatory and compliance requirements under one Act and Regulator differ from those of others, leaving financial planners at risk of breaching one requirement in order to meet the conditions of another.
“As well as the compliance risk, this has a significant impact on costs and efficiencies, particularly on small licensees who have less support and will find it find it harder to meet the increasing regulatory demands.
“The current complexity in financial services law also makes it more challenging for consumers to understand, trust and engage with the financial system, and understand their rights and the consumer protection mechanisms available to them.
“Broadly, the FPA agrees with the proposed structural amendments suggested by the ALRC which are intended to reduce complexity in corporations and financial services legislation. We strongly believe that the language and structure of the Corporations Act must be improved to allow everyone – including consumers – to better engage with the financial services sector,” Ms Abood says.
NOTES FOR EDITORS:
In its submission, the FPA states: “The FPA supports and has been calling for a similar review in the legal framework for financial services regulation since the introduction of the Corporations Act in 2001. The regulation of financial advice as a financial product has never sat well with the professional financial planning services provided by FPA members. While planners use the financial products otherwise regulated under financial services law, planners themselves provide a professional service. They assist their clients in understanding and articulating their goals and objectives, recommending strategies in the form of a financial plan so their clients can live their best lives, and importantly keep them on track to achieving those goals as life throws up a variety of challenges and opportunities.
“For this reason, the FPA welcomes the Commission’s work to identify and provide practical solutions to improve the operation and structure of the Corporations Act 2001 and subordinate regulations and legislative instruments, to simplify and support the professional services provided by the financial planning profession for the benefit of Australian consumers.”
As part of its submission, the FPA has made a number of recommendations from its policy platform “Affordable Advice, Sustainable Profession” to make further improvements to the regulation of advice.
- 1 – General advice – The law should be changed to rename the term ‘general advice’ to ‘product information’ and ‘strategy information’, which better reflects the definition and is less misleading to consumers.
- 2 – Restricted and like terms – the use of the terms ‘financial planner’, ‘financial adviser’ and like terms (including ‘financial coach’, ‘financial mentor’ and ‘financial guru’) should be reviewed to determine if restrictions on the use of these terms are effectively protecting consumers from unqualified financial advice.
- 3 – Sophisticated investor – The law should be changed to revise the test for a ‘sophisticated investor’ by increasing the dollar- value threshold to an appropriate and contemporary level, providing a method for indexation and introducing a financial capability measure.
- 2 – Separation of product and advice – The law should be changed to separate the regulation of financial products from the regulation of financial advice.
- 3 – The future of licensees – The law should be changed to focus the AFSL system on the regulation of financial products and remove the requirement for an AFSL to cover the provision of financial advice.