ASIC wasting time and resources

ASIC, hard-pressed for funding and resources, has embarked on a costly exercise aimed at determining the quality of retirement advice at a time when the underlying rules of the game are clearly in a state of flux, writes Mike Taylor.

It is a long time since the newly elected Rudd Labor Government placed a further round of shadow-shopping on the ‘to do’ list for the Australian Securities and Investments Commission (ASIC).

A Federal Election has intervened, a Parliamentary Joint Committee (Ripoll) has had its say and the Future of Financial Advice (FOFA) changes are being debated.

So the bottom line appears to be that a regulator, hard-pressed for funding and resources, has embarked on a costly exercise aimed at determining the quality of retirement advice at a time when the underlying rules of the game are clearly in a state of flux as a result of the FOFA debate and the recommendations of the Cooper Review.

It might be added that ASIC is undertaking this shadow shopping exercise at exactly the same time it is participating as a ‘stakeholder’ and providing advice to the Government on issues relating to FOFA and the Cooper Review.

Many would argue that both the timing of the exercise and the resultant expenditure are highly inappropriate.

It does not matter that ASIC Commissioner, Greg Medcraft, has said the shadow shop will not be aimed at “naming and shaming” financial planners.

He ought to know as well as anyone else that there are elements within the financial services industry that will seek to publicly magnify any negative findings with respect to planners.

On the brighter side, ASIC has confirmed the shadow shop will include intra-fund advice provided by superannuation funds – something clearly necessary not only in the interests of fairness but also because of the manner in which the financial planning industry has evolved over the past three years.

Indeed, if ASIC were to do the shadow shopping job properly it might also find a way to test the value and validity of the so-called ‘industrialised advice’ mechanisms that have evolved as a direct result of the lighter-touch regulatory approach applying to intra-fund advice.

It has been nearly eight years since ASIC embarked on its first shadow shopping exercise, and it succeeded in identifying some genuine shortcomings in the financial planning industry that needed to be addressed.

The regulator’s second shadow shopping exercise served to reinforce some of the findings of the first, but also suggested that the industry had picked up its act.

It has been a long time since the last shadow shop and the industry has changed a great deal. It is now confronting further substantial change. ASIC’s time, money and resources would be better spent elsewhere.