Not long ago, we discussed the Financial Sector Reform (Hayne Royal Commission Response—A New Disciplinary System for Financial Advisers) Bill 2021 and its implications for financial advice.
As the Bill’s title entails, it proposes an expansion of the Financial Services and Credit Panel (FSCP) within ASIC so as to facilitate the single disciplinary body for advisers as recommended in the Royal Commission. This is being designed to address one of the perceived flaws in the advice regulatory system identified in the final RC report, which noted that the only power ASIC typically has to address adviser misconduct is banning orders, “which was not always appropriate for more minor breaches.”
Issues that could be referred to a convened panel include circumstances where advisers have contravened a “restricted civil penalty provision” as determined by ASIC, but ASIC has not proposed a banning order.
Commenting on the proposal, Financial Planning Association CEO Dante De Gori said it will have a “lasting impact on our profession, our members and the consumers they advise,” suggesting the consolidation of advice standards will go some ways to improving advice affordability.
He continued: “The FPA has long advocated for the need for reform to reduce duplication and rising costs facing financial planners. We welcome the recognition of this in the draft legislation with the proposal to wind up FASEA and removing the redundant oversight of the TPB being important steps in achieving this goal.”
Despite the FPA’s broad support for the Bill, De Gori argued that more adjustments need to be made in order to avoid the issues of regulatory duplication (and associated costs) that have plagued the industry for some time. This is because, based on the proposed system, the AFSL holds responsibility for adviser registration, which means registration is dependent on the AFSL’s ongoing engagement with an adviser.
To remedy this, the FPA has proposed in a submission that registration should be the responsibility of the individual adviser.
“A financial planner’s registration should then follow them throughout their career,” De Gori continued, “and be a valued symbol of their professional status and commitment to uphold professional values. The creation of a personal obligation to register is an essential component of any professional framework.”
“It’s the missing piece to the puzzle. Similar to the legal, medical or architectural professions, the FPA strongly supports a model in which registration is the personal responsibility of each financial planner and is not connected with their employment or authorisation under an AFSL.”
This isn’t the first time the FPA has advocated for individual registration of financial advisers within the context of the Government’s post-Royal Commission implementation agenda. Last year, for instance, De Gori said that individual registration “acknowledges the relationship between a client and their financial planner is a personal relationship, not one between an AFSL and the client.”
It was clear back then, though, that there wasn’t unanimous support for this idea within the industry. A joint statement – signed by 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 – argued that individually-licensed advisers “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.”
Even now, without the additional proposals put forward by the FPA, there are concerns around ballooning costs under the single disciplinary body system. A submission by SMSF Association CEO John Maroney notes that because there are no set time frames for FSCP investigations in the Bill, investigations could become “protracted with matters lingering or mired as a result.”
Maroney said that efficiency, particularly when dealing with “simple or minor matters,” will be critical to “containing costs incurred in processing, assessing, investigating, referring and then addressing matters before the FSCP.”
These concerns are understandable given the additional resourcing ASIC has said it will require to assume these new responsibilities – at a time when advisers are still reeling from a sharp increase in the industry funding levy.
Wherever you stand on the FPA’s position regarding individual registration, it’s plain to see that the Government’s proposal as it currently stands requires further clarification.
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