In its submission to the regulator’s consultation on affordable advice, the association pointed to the negligible budget ASIC spent on education in the advice sector compared with enforcement, saying the regulator should adopt a “prevention is better than cure” mantra and increase its focus on adviser engagement.
“Whilst we only have a high-level breakdown of the total costs by type of activity from the June 2020 Cost Recovery Implementation Statement, that was based upon a total spend of $40.1 million, it is important to note that $19.9 million related to surveillance and enforcement,” the AFA said.
“This highlights the level of focus that ASIC has on misconduct in the financial advice sector. In reviewing this expenditure by ASIC, what is disappointing is that only $0.8 million of the original forecast of $40.1 million was being spent on education and guidance.”
The AFA said the layout of ASIC’s regulatory guides were a key example of an area where the regulator could benefit from more investment in modern, engaging content.
“As small business operators, and most of financial advice is small business, [advisers] are time poor and have numerous other competing objectives and obligations,” the association said.
“It is important for ASIC to be cognisant of the fact that they are predominantly working with small businesses, and accordingly design their communication mechanisms in this context.
“The reality is that the current regulatory guides are largely text-based documents that do not leverage the advantages of modern technology or use multi-media options.”
The association said the regulator’s post-royal commission ‘why not litigate’ stance had created a culture of fear among licensees, which was contributing to the current reluctance to allow advisers to provide scaled advice.
“The royal commission resulted in demands for ASIC to be more assertive and to litigate in preference to pursuing enforceable undertakings. This change of mind-set and approach has impacted the culture of the financial advice sector,” the AFA said.
“Licensees do not feel comfortable to challenge ASIC or to discuss with them any concerns that they have about the way they have been treated by ASIC, on the basis that a complaint could lead to a more aggressive approach.
“Whilst we have no issue with ASIC vigorously pursuing a licensee or a financial adviser who deliberately and knowingly committed misconduct, we feel that it is necessary to take a more balanced approach when the misconduct was the result of a lack of understanding of what might be a poorly articulated obligation.”
Agree. They should be there to help rather than put in place ridiculous levels of regulations and then punish those who don’t meet them (which in all honestly is probably everyone at some stage).
The red tape they keep putting in place only makes it harder for the honest advisers, which is probably about 98% of us. It does nothing to deter the crooks. All it does is make advice more complicated than it needs to be and therefore more expensive than it needs to be. How many doctors have to write an SOA for giving medication that could have life changing consequences?
“Licensees do not feel comfortable to challenge ASIC or to discuss with them any concerns that they have about the way they have been treated by ASIC, on the basis that a complaint could lead to a more aggressive approach.” – after what they did to Dover, no licensee in their right mind could feel secure in running their business…
Now we are starting to get to the root cause of our problems