TAA calls for self-regulation of advice profession

TAA chief executive Neil Macdonald said that the Joint Associations Working Group (JAWG) proves that financial advice associations are able to come together to advance the profession, making self-regulation a viable prospect.

“JAWG includes key associations from across the industry, representing many different types of financial advisers and many with quite different views, yet it is able to arrive at enough commonality to produce, for example, joint submissions to Treasury on the future of the profession,” Mr Macdonald said.

“Since forming, some of the member associations have merged, so increasingly, we have a common voice.”

He added that over the two decades since the Financial Services Reform Act (FSRA), the financial advice landscape has changed dramatically, with greater consumer protections in place.

“The ASIC business model of regulation that resulted from that was predicated on a small number of large institutionally-owned licensees – e.g. the big four banks. That has changed over the past five years, and we now have a few large licensees and many smaller ones,” Mr Macdonald said.

“The Future of Financial Advice reforms, the best interests duty, and the exit of the banks has radically and quickly changed advice firms and advisers. It’s a whole different ball game.”

The Quality of Advice Review (QAR) and the Australian Law Reform Commission (ALRC) recognised that regulation and legislation have built up over the years, he said, adding it has resulted in an “overly complicated complaint process for advice” that doesn’t have any material benefits to consumers.

“Our industry and our associations have matured, we are now a profession and professions self-regulate,” Mr Macdonald said.

“The role of associations could include the setting and supervision of not only education standards, but also ethical standards. Associations could very effectively triage and address problem advisers and maintain appropriate professional standards.”

He also said the industry associations are well-placed to handle Standard 12 of the Code of Ethics, which requires financial advisers to report any unethical behaviour of their peers.

“In fact, Australian Financial Complaints Authority data shows advisers are harder on other advisers than AFCA staff when reviewing cases,” Mr Macdonald said.

Mr Macdonald’s comments follow the Financial Services Council (FSC) last week outlining its policy and advocacy agenda for licensees and also calling for self-regulation.

In a video update that featured Zach Castles, FSC’s policy director for advice and platforms, the council outlined its agenda aimed at helping unburden advice licensees.

“There are over 6,000 advice practices in Australia, the advice businesses authorising some 15,000 financial advisers, otherwise referred to as advice licensees,” said Mr Castles.

“Licensees are absorbing increasing levels of regulatory costs that the FSC is advocating be reduced,” he noted.

Speaking to ifa, Mr Castles explained that the FSC supports a regulatory framework that “recognises and respects” that financial advisers are professionals.

“A move to greater levels of self-regulation over time also envisages advice businesses having adequate levels of capital and professional indemnity insurance,” he explained.

“Over time, the FSC supports the government identifying areas where self-regulation and industry standards can serve the objectives of improving financial advice for consumers.”