Advice a service, not a product insists FPA

Regulation of financial advice as a financial product has never sat well with being a profession and the Financial Planning Association (FPA) is urging the Australian Law Reform Commission (ALRC) to recommend changes to the Corporations Act to end that nexus.

Releasing its submission to the ALRC today, the FPA told the ALRC that while planners use the financial planners use the products regulated under financial services law, the planners themselves provide a professional service.

Releasing details of the submission today, FPA chief executive, Sarah Abood said it was 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,” Abood said..

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,” the FPA chief executive said.

“This all comes at the cost of providing clear, concise, efficient and affordable advice to ordinary Australians who need it most,” Abood said.

“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,” Abood said.