Ex-ASIC commissioner says advice has gone ‘back to the future’

Appearing on Netwealth’s podcast, Between Meetings with Matt Heine, former commissioner of the Australian Securities and Investments Commission (ASIC) Danielle Press argued that following the 2019 royal commission, the advice profession appears to have reverted back three decades.

“I think the outcome of the royal commission was predictable. Big banks went, ‘This is all too hard. We haven’t actually priced risk properly. We can’t manage this in a way that is profitable. We’re out’,” Press said.

“The industry now looks like it did 30 years ago, actually, where there were a whole lot of independent financial advisers, and the big guys but … there was a lot more choice around where you could get your advice from, what type of advice you got.

“So, it feels to me a little bit like back to the future.”

She explained that super funds have taken over the role previously played by banks and insurance agencies, working their way into advice, but that they do have a role to play in the future of advice as long as consumers are adequately informed about the service they provide.

“In this future, it’s the super funds that are taking the position of the banks, right. They don’t look unlike the old, tired insurance agencies, particularly when you start looking into and facing into the retirement space and thinking about longevity products, which are truly long-term lock-in products in a completely 100 per cent vertically integrated business,” Press said.

“I really hope that as an industry, we’ve learned some of our lessons and we don’t go back to some of the poorer behaviours that we saw before from that tiredness, and the vertical integration doesn’t worry me, vertical integration for me is absolutely fine actually, as long as you understand what it is, manage the conflicts, and your customer knows what it is, right?

“What worries me is when you go into Ford, and you’re given a Toyota, but you think it’s a Ford, right? That doesn’t work. It’s got to be, you’ve got to be really clear about what you’re selling. I do think we’re a little bit back to the future.”

Regulatory changes over recent years, she added, focused too heavily on consumer protections, and recent efforts to roll back over regulation have benefited the profession overall.

“I think the pendulum on the regulatory side swung too hard, right? And I think it’s gone to, ‘We’ve got to protect the consumer at all costs. These big, bad, terrible financial advisers. The industry is broken’,” Press said.

“I don’t think the industry was ever broken. I think there were parts of it that were broken. But again, I think it was predictable that it was going to swing that hard. And I think some of the unwinding that we’re now seeing is pretty important.

“I think the Quality of Advice Review, again, that feels a little bit like back to the future to me, you know, ‘Let’s replace an SOA with a record of advice’. Well, before [the Future of Financial Advice reforms] isn’t that what we actually all did?”

Furthermore, Press explained that the advice profession seems to have gone in a cycle, now resembling it as it was decades ago when it was more respected within the wider Australian community.

“Let’s make sure we’ve got the interest of the client but it doesn’t have to be ticking off all of these very specific duties. You know, I think all of that stuff is important and I think there’s a balance here,” she said.

“I do think the industry is professionalised and I think that was really important. But again, if you cast your mind back 30–40 years ago, financial advisers were absolutely pillars in our community. They were people that could sign statutory declarations, they were clearly being thought about as professional people.

“Somewhere we lost our way and I think we’re now getting back into that. The biggest concern for me is, are we ever going to have enough advisers to service the country? The answer is probably not, which means we’re going to have to rely on technology.”