Fostering stronger regulatory relations in 2025

The key to addressing the advice industry’s strained relationship with its regulators can be summed up by the quote, “Seek first to understand, then to be understood.”

Made famous by American author Dr Stephen Covey in his bestselling book, The 7 habits of highly effective people, the phrase highlights the importance of listening in order to build connection, understanding and respect.

Only by understanding and, importantly, respecting the mission and purpose of its regulators can licensees and advisers build strong, effective regulatory relationships.

But the advice industry has historically been poor at listening. In the rush to get its points across, it has skipped the discovery phase.

As a result, licensees and advisers are generally poor at responding to regulatory inquiries and statutory notices, and poor at getting cut-through.

In the end, they are left confused and angry by regulatory rulings, particularly when they feel that the punishment doesn’t fit the crime.

It’s all about public interest

The Australian Securities and Investments Commission (ASIC) is the main regulator of the financial services industry, but there are other regulators too.

If a licensee or adviser does not agree with an ASIC direction or ruling, they may seek a review of the decision by the ART (formerly the Administrative Appeals Tribunal). Beyond that, they can take the matter to the Federal Court.

As such, the motives and views of the ART and the Federal Court are just as important as the motives and views of ASIC.

But many fail to appreciate just how in tune these stakeholders are.

Everything ASIC does – every investigation, statutory notice, banning order and direction – is driven by the best interest of consumers.

As stated by ASIC: “Our powers are designed to protect consumers against misconduct and harms relating to financial products and services.”

Similarly, the premise of ART and the Financial Services and Credit Panel determinations is consumer protection and public interest.

Values and objectives

Reading industry submissions to various government inquiries and consultant papers over the years, including the Life Insurance Framework, Quality of Advice Review and Delivering Better Financial Outcomes package, provides telling insights into the disconnect that remains between parts of the advice industry and its regulators.

Understandably, licensees, advisers and industry associations focus heavily on how proposed changes will adversely impact their businesses and members and put forward alternatives that protect or expand their legitimate interests.

The key, however, is to demonstrate an acute understanding of, and support for, reforms that are designed to address poor advice practices, strengthen consumer protections and drive improved outcomes.

While there is nothing wrong with advancing one’s own legitimate interests (advice businesses should educate regulators about the practical implications of their recommendations and actions, and push for reforms to build a thriving profession), the industry needs to put consumers first in everything that it does.

Unless this happens, the financial advice industry has little hope of being recognised as a bona fide profession.

For over a decade, advice has teetered on the edge of a profession but never quite crossed the line.

Sadly, advisers still do not enjoy the same benefits as other professions, including accountants, lawyers and doctors. The main benefits being self-regulation and limited liability.

Instead, advice remains one of the most heavily regulated industries.

Statutory function

At the end of the day, ASIC is a statutory body, established by government to achieve the statutory objectives set out in the ASIC Act.

When ASIC bans an adviser for misconduct or inappropriate advice, or suspends or cancels an AFSL, they are not exercising their discretion, they are applying what the law obliges them to do. They are enforcing Chapter 7 of the Corporations Act in the name of consumer protection and the integrity of the financial services system.

The start of a new year provides the perfect opportunity to revisit section 760A of the Corporations Act, which is basically ASIC’s mission statement for the whole of Chapter 7. It talks about fairness, transparency, consumer confidence and professionalism, providing a lens to see why ASIC does what it does.

When ASIC imposes penalties for failing to provide a client with a Financial Services Guide or issuing a defective statement of advice, they are enforcing the many non-negotiable requirements of the Corporations Act.

Regulators interpret the law and exercise their powers with a myopic focus on the public interest.

It is part and parcel of being a financial adviser and operating an advice business.

Licensees and advisers have the privilege of helping people protect, build and manage their wealth, and achieve their goals and objectives.

At a personal level, they can build successful businesses and achieve their own ambitions. But those perks come with obligations.

The purpose of regulation is not to make life difficult for participants. It is intended to direct the behaviour of individuals and organisations, enable business activity and guide public policy.

Cristean Yazbeck is managing director of Hamilton Blackstone Lawyers.