ASIC barking up the wrong tree on scaled advice

Easton Investments managing director Nathan Jacobsen told ifa while ASIC’s consultation on affordable advice was “a great opportunity” for the industry to have a voice around the regulatory framework, the focus on scaled advice as a starting point was flawed.

“In the focus on lowering the cost of advice it became a conversation on scaled advice documents, which is not the problem,” Mr Jacobsen said.

“The problem isn’t whether you produce an ROA or SOA, the problem is no matter how scoped the advice is, the amount of documentation an adviser has to produced from end to end doesn’t change that much. So the notion of advice being delivered for $500 in that environment is flawed.”

Mr Jacobsen said the “principles-based” direction of the FASEA code, which aimed to bring advice into line with professions such as law, was at odds with subsequent guidance around the code as well as the interpretation of its principles by AFCA, which relied heavily on record keeping as proof against an adverse claim by a client.

“We’re increasing record keeping as a process of black and white interpretation of the rules at the same time as the industry is being forced to professionalise, and at some point those two have to recognise each other,” he said.

“The guidance on how to interpret the standards [and] the connection to what happens if something goes wrong ... if a client complaint ends up at AFCA, AFCA’s going to solve that by looking at records.

“That’s where the comparison to the legal industry falls over, which is that their obligations are to act ethically and professionally, whereas an adviser’s obligation is to do that and write it all down. AFCA will rely on those records and both ASIC and AFCA will presume in the interests of the consumer in an absence of the record.”

Mr Jacobsen, who was recently appointed to head up Easton following the sale of formerly HUB24-owned licensee Paragem to the group, said government and ASIC would need to work together with industry to dismantle the conflicting parts of what had become an increasingly confusing regulatory regime.

However, he said there was also a role for licensees in providing the technology for their advisers to quickly and easily replicate the paperwork needed in the advice process, with technological capabilities playing a key role in the decision for HUB24 to take a 40 per cent ownership stake in Easton following the sale of Paragem.

“Treasury and ASIC have to play a role, we can’t solve it by ourselves, but equally I think we have to invest in the infrastructure to automate some of these things,” he said.

“The industry needs to move beyond people writing on pads and hitting keyboards to leverage machine learning, voice to text, building an infrastructure that makes that achievable without the same cost imposition.”