‘Stop putting lipstick on it’: Adviser argues we should ditch the AFSL

Speaking with ifa, financial adviser and PlanningSolo founder Jordan Vaka said his “soapbox” issue within the advice profession is the licensee system.

“I don’t think the AFSL licensing system makes any sense at all. I didn’t see any reason to keep it. I think it should all be completely abolished and pass that cost back to advisers,” Vaka said.

“Everybody that tries to convince me that it makes sense says, ‘Well, all we need to do is make a different shade of lipstick for the pig’. And I’m like, ‘Why are we using a pig to regulate our business? Stop putting lipstick on it. Get rid of the pig. We’re gonna do something properly like grown-ups’. But it doesn’t really work.”

While he recognised that it is unrealistic, Vaka explained what his perfect system would look like for advisers without a licensee.

“In my perfect world, and it’s very utopian and very unrealistic, we would be individually registered, we would have nothing to do with ASIC, and advice would be removed from the Corporations Act,” he said.

“We would be on our own. We would be licensed and authorised individually through an association, be it the Financial Advice Association Australia or some other body, and we’d be subject to their requirements like every other profession. And that’d be that.

He explained that, due to a technical issue, it may not be possible to completely remove advice from the Corporations Act. Even so, he said, “there has to be a better way to do things”.

When discussing the issue with other advisers, Vaka said questions about compliance and consumer protection inevitably arise, however, he believes the current system is already failing consumers so it may be time for a new approach.

“The arguments I always hear are: ‘Yeah, but what about compliance and things like that?’ We would just have one source of truth for compliance. Instead of having 300 different licensees having a different version of a statement of advice, we would have one,” he said.

“People say, ‘Well, how are clients gonna be protected?’ They’re not protected now. It’s not like the system we have now works. It’s garbage. People are losing hundreds of millions of dollars in this system, that apparently is all we’ve got. How much worse could it be if we went individual?

“Ultimately, we’ve been through the educational stuff, we’ve been through the experience stuff. Where’s the quid pro quo for making our profession an actual profession? To me, and I can say it because I’m self-licensed, as long as the AFSL system exists, I don’t think we will have any leverage.”

As the industry struggles to reduce business costs and bring down the price of advice, Vaka argued that removing the AFSL would put money back in advisers' pockets, thus bringing down the cost to operate a business and, in turn, the cost charged to consumers.

“If I explain the way licensing works to anybody outside of advice, they look at me like I’m insane. Lawyers, accountants, engineers, they look at you like, ‘Why would you do it like that? It’s so expensive’. And that’s why the affordability of advice thing, to me, it’s just so hollow,” he said.

“The most expensive part of advice is licensing. It costs the average adviser $40,000–50,000, and you multiply that by the number of advisers left and it’s a horrendously big number. You pull that out of the system, and you put half of it back in, advice is still going to be cheaper.

“That’s how you make advice affordable. But that was never considered because there’s too many interests involved. That to me is the solution to advice. Do that. But that was left off the table through the whole review, which I think invalidated it, to me anyhow.”