FSC argues for pragmatism on cost of advice
Advice is becoming unaffordable and the cost of regulation needs to be addressed, according to the Financial Services Council (FSC).
What is more, the FSC is arguing that the efforts by regulators to provide some flexibility to financial advisers and others during the COVID-19 pandemic represents an example of the regulatory pragmatism necessary to address the broader cost of advice issue.
In a column to be published in the latest print edition of Money Management, FSC policy manager, advice, Zach Castles, states that regulation is the largest contributor to the cost of advice and that too many consumers are being priced out of receiving critical financial advice when they need it most due to unacceptably high advice costs.
“Let’s be clear – regulation is the largest contributor to the cost of advice,” he said. “On top of this, advice businesses across Australia are fielding emerging challenges as well as old ones. Lockdowns, working from home and escalating pressure on the mental health of the advice profession is occurring as businesses continue to ready compliance systems for the passage of Royal Commission legislation and adapt to other tectonic shifts reimagining the financial advice landscape. These include the transition to open banking; the acceleration of fintech; and the largest proliferation of state assistance to consumers and businesses seen since the Second World War.
“All such developments will shape the innovation, expertise and products that delivering quality advice for millions of consumers, and the very issues they need advice on. Many such issues are quite small and simple but are held back by regulations that lack sophistication.
“Our consumer protection framework is functioning, but for it to be sustainable it must work much more efficiently. Ironically, we have reached a situation in which regulatory pragmatism is preventing consumer detriment, not necessarily the regulation itself,” Castles writes.
“That regulators are assessing industry concerns, and now taking no-action positions and granting relief or clarity within their powers is encouraging. ASIC recently extended the COVID-19 relief it announced in June for providing flexibility in the use of Statements of Advice and Records of Advice. It is another example of regulatory pragmatism now having to manage rather than resolve the gargantuan complexity and confusion besetting the provision of financial advice.”
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