Licensees need ‘cultural change’ says FPA
The Financial Planning Association (FPA) has drawn a clear dividing line between the interests of financial advisers and licensees, using its response to the Quality of Advice Review (QAR) proposals to claim that licensees have created their own rules.
The FPA QAR response, released today, has broadly welcomed the shift to a more principles-based approach to regulating the provision of financial advice but, at the same time, has pointed to the need for “cultural change” on the part of licensees.
“The proposed reform package may require cultural change by licensees and ASIC who have been historically reliant on the current licensing system and a track-record of interpreting and implementing the obligations in the law using a prescriptive tick-a-box compliance approach, as it is viewed as being easier to monitor and demonstrate compliance with,” the FPA submission said.
It said the view from FPA members, compliance consultants and licensees “is that each ASIC notice, ASIC reports (such as 515) and statements made through the Royal Commission by ASIC has led to licensees imposing additional compliance requirements and tighter processes which go above and beyond the law”.
“Additionally, in the past, licensees have created their own rules and additional requirements if they believed the legal requirements exposed them to too much risk, particularly in relation to potential consumer complaints, AFCA action or hardened professional indemnity insurance conditions.
o There is no precedence in AFCA determinations, which creates significant uncertainty as to how the EDR scheme (and predecessor schemes) will interpret requirements.
o PI insurance is the most significant business expense for small and medium sized financial planning licensees.
o It is unclear how AFCA and PI insurers would adapt to principles-based regulation for the provision of financial advice.
The submission also pointed to consumer protection gaps stating:
The package of proposals has the potential to create gaps in legislated consumer protections and may encourage avoidance behaviour:
o Licensees, particularly product providers, will be able to determine their own requirements to protect consumers, including competency of representatives, while at the same time relaxing disclosure requirements
o It is unclear how the new requirements will interact with the Code of Ethics.
o There is a risk that the proposed reform package is solving one problem but creating another. It provides greater flexibility and professionalism for planners, but relaxes requirements for product providers who would operate under different rules and would not be assessed as stringently as more qualified financial planners are assessed, leaving consumers exposed.
- Improving consumer access to affordable financial advice must include appropriate consumer protections and provider transparency to ensure the opportunity for misconduct and consumer detriment is avoided.
ASIC, AFCA, FARSEA & Government NEED Cultural change FIRST.
Then Licensee’s and Advisers can have some comfort adopting change.
As for the FPA the best change you can make is rename yourself as the Consumer’s, Institutions & Super Fund Association.
The FPA must change culturally and stop masquerading as an Adviser Association when you do so much against Real Advisers.
100% on the money, Colin! The FPA has been the buddy of big business and LNP while they sold advisers out every step of the way. Now that their big fat juicy revenue stream of intuitional advisers is drying up they are suddenly speaking up for advisers. Pathetic about face that fools no one who understands what the FPA has done to advisers over the years.
I guess the question should be raised as to why professional financial advisers need to operate under an AFSL in the first place. Every adviser should be self licensed. Those people working for product providers, sales teams, and robo advice should all still be under the supervision of the AFSL regime still because let’s face it, they are not qualified professionals, so why should they have such lax rules to operate under (as per the QAR) but advisers have more stringent requirements. It should be the other way around.
In addition to this AFCA complaints should be governed by a the Single Disciplinary Board, unless AFCA can manage complaints appropriately, faily and in an unbiased manner.
I really don’t blame licensees, I blame bad legislation written in isolation. We’ve got Privacy Laws, AML/CTF legislation, corporations law, ASIC and AFCA. The issue is Treasury and ASIC writing bad laws to start with and then in isolation. Who the hell writes fee consent laws where you can’t get a form signed on a Monday because the anniversary date is Tuesday.
You have to understand that at the end of the day, Licensees are a business too and they are entitled to dictate fees and terms as we all live in a free markets economy. So for advisers that are frustrated, it’s the Law that you should be mad at, not the Licensees. They are not doing anything illegal.
Did you miss the part where the article mentions they are going above and beyond what is the law? It’s all just to protect themselves.
You are correct, they did it to protect themselves – do you do any different? But when you have a guilty until proven innocent, coaching claimants and having no impartiality or consistency at all (AFCA) and keystone cop regulator (ASIC), Licensee behaviour is totally understandable. And it would be IRRESPNSIBLE of licensees NOT to try and protect the business and the brand they are attached for all of their AR’s. Not saying all licensees did this well, most probably didn’t, but the motivation is a normal human reaction let alone a prudent business decision.
In saying this I have the luxury of operating under an independent (oops wrong word), “non aligned” licensee and the corporate ones crushed their AR’s with compliance overreach. The system is clearly a sh!tstorm but the government and regulator are the primary culprits and the FPA stood by and applauded whilst watching an attempted murder of an entire group of hard working Australians.
Nice comment & good call! Bad legislation, kangaroo courts, Keystone cops, I guess its all symptomatic as to why licensees are the way they are.
FPA is in need of a culture change – I would like to remind them that they are supposed to be representing the ADVISERS. They forgot that one small detail a long time ago!!!
Indeed. There is a vote coming up to merge FPA and AFA. As a frustrated FPA member I will be voting in favour, as the injection of AFA directors and executives is the best chance to create upheaval and drive cultural change. FPA will never change otherwise.
I have been in this industry for 35 years, qualify in every aspect of FASEA, have worked for and consulted to the Council of Financial Regulators and I am making the point that nothing will change for advisers providing advice to retail clients so long as the Code of Ethics remains as it is now.
This then makes the QAR, in its current form, that is excluding the Code of Ethics from its ToR, irrelevant to the advisers covered by the Code.
Standard 5 and Standard 6 need radical change as no other profession has to ‘GUARANTEE’ that the customer or client understands the advice they have provided (this why they [consumers] see experts) (Standard 5); Standard 6 is non-sensical no other profession has a catch-all “consider EVERYTHING”. Standard 3 is an insult and basically states that we aren’t as ethical as other professions and mustn’t be allowed to handle conflicts under the existing laws as do lawyers, accountants and moreover, those financial service product providers that caused the problems in the first place.
QAR specifically has excluded the Code and therefore, in its [QAR] current form, is only there to provide the Industry Superfunds and other large institutions with the ability to ignore ‘best interest’ and the Code.
Neal, you must be a hammer. NAILED IT!
i think im going to become a money coach, its all too hard
At leaase as a money coach you don’t need to fund ASIC, the various adviser bodies, an AFSL, Audit costs, PI Insurance and the CSLR…