Don’t believe the hype!

There has been a lot of conjecture of late in the wake of the quality of advice proposals surrounding the potential for licensees to place unjust, overreaching measures, requiring advice documents regardless of legislative change and reform. Many believe that licensees will try to justify their existence by conservatively interpreting new regulations and placing an extra burden on advisers.

In my opinion, it is highly unlikely that the majority of licensees will take that position.

We have, over the years, evolved towards more of a service provider proposition, despite the resource-heavy supervisory obligations currently in place.

If anything, the QAR reforms could take the shackles off us and enable a greater focus of our resources and expertise on supporting advisers in growing their businesses and providing quality advice to clients, rather than supervising an unwieldy advice process.

QAR reforms could offer more freedom for licensees to develop meaningful and valued services to advisers which includes compliance teams focusing more on building adviser competence and capability.

Let’s be frank though … even with the abolition of the statement of advice (SoA) as we know it, there will still be a desire and a need to provide clients in certain circumstances with written disclosure and in some instances, confirmation of the advice provided. Furthermore, there will be a requirement to keep a record of the advice, which in many cases, it will make sense to give to clients when delivering advice.

Licensees will need to build a framework for advisers and guidance that considers advice complexity and the disclosure requirements of that advice.

There is also a lot of fear and uncertainty regarding the impact on PI Insurance and potential future complaints and claims with the removal of SoA requirements. On the surface, this would appear to be a valid concern, but if you dig a bit deeper into the process that AFCA currently follows when investigating a complaint, the SoA does not play a major role.

It is the context of the advice, the evidence that the adviser knew the client, understood their goals and objectives and developed the advice with these in mind. The file notes, interactions, and discussions between the adviser and client verify the appropriateness of the advice, not simply the advice documentation.

In the post-QAR world, this will not change. The focus will be on the file notes and the documentary evidence of these interactions. Without an SoA, these file note processes will continue to be crucial in demonstrating the appropriateness of the advice.

I look forward to evolving the support and guidance that we provide to our advice community in whatever shape these reforms take over the coming year. As a licensee, we have no intention of building extra roadblocks in the advice process. However, depending on where the QAR reforms land, we will endeavour to provide the guidance and process that advisers will need to continue to provide compliant and quality advice to their clients.

Eugene Ardino, CEO, Lifespan Financial Planning