As part of its five-year policy platform, the FPA has proposed a major overhaul of the current licensing system in financial advice.
The proposal argues that the current AFSL framework should focus on the regulation of financial products and not the provision of advice, because currently the system duplicates regulation and creates unnecessary regulatory costs. It also, the FPA has suggested, introduces conflicts between the “house rules” of the licensee and the judgement of the individual adviser.
Explaining the proposal, FPA chief executive Dante De Gori said: “While the AFSL system plays an important role in regulating financial products and services, recent reforms have focused the regulation of financial advice at the individual practitioner level.”
“This is an appropriate approach and acknowledges the relationship between a client and their financial planner is a personal relationship,” he continued, “not one between an AFSL and the client. Future reforms to the regulation of financial advice should occur through the professional standards framework and rely on individual registration of financial planners.”
The idea of individual registration for advisers was discussed in the final Royal Commission report as part of the establishment of a single disciplinary system for the industry. At the time, Commissioner Kenneth Hayne said that a “a requirement of individual registration as a condition of practice is common to most professions,” including health practitioners, lawyers, architects and teachers.
In its proposal, the FPA said individual registration will “promote portability of qualifications between businesses and licensees, and promote financial planners taking responsibility for their qualifications and compliance with professional standards.”
Not everyone in the industry agrees, though. A joint statement representing multiple dealer groups argued that “the individual planner that does self-license will incur the set costs of compliance, governance, and a raft of statutory obligations in providing that advice.”
“These costs,” the statement added, “are not discretionary. They are mandatory and – in the absence of scale – would likely rise to the detriment of the consumer.”
Other issues cited in the statement included increasing PI premiums and “the leading work that AFSLs bring in areas of education, risk mitigation, compliance, consumer best interest measures and commercial support to advisers and their clients.”
Signatories to this statement included Fortnum Private Wealth managing director Neil Younger, Centrepoint Alliance chief executive Angus Benbow, Easton Wealth chief executive Grahame Evans, CountPlus chief executive Matthew Rowe, Fitzpatricks Private Wealth chief executive Matt Fogarty and Paragem managing director Nathan Jacobsen.
Responding to this, De Gori said the FPA welcomes ongoing debate around its proposal, adding: “The AFSL does not make the planner, just as the hospital does not make the doctor, nor the law firm the lawyer. Individual financial planners are the ones who provide financial advice and the regulatory system should focus directly on their professional qualifications and behaviour.”
Where do you stand on the issue? Is it time for advisers to become individually licensed?
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