Regulators shoehorning consumers into full-service advice not what consumers want

In response to ASIC’s consultation paper on promoting access to affordable advice for consumers, Stockbrokers and Financial Advisers Association (SAFAA) CEO Judith Fox has called for ASIC and the government to move away from a ‘one-size-fits-all’ approach to the provision of personal advice to retail clients.

‘Consumers want different advice for different needs and the regulatory environment needs to accommodate consumer preferences and requirements and not seek to shoehorn all consumers into one advice service,’ says Ms Fox. ‘The current complex and volatile market conditions highlight the importance of accessible and affordable financial advice.’

ASIC’s own research highlights that many consumers prefer receiving piece-by-piece or limited advice, rather than comprehensive advice and that 45% of consumers had either received advice on or were interested in receiving advice on investments such as shares and managed funds.

‘Scaled advice is an accepted concept adopted by stockbrokers in Australia and forms the basis of the business models of many stockbroking businesses,’ says Ms Fox. ‘However, ASIC’s and FASEA’s inconsistent approach to scaled advice is a key impediment to the delivery of quality, affordable advice to retail clients.

‘ASIC’s regulatory guidance supporting scaled advice does not match reports it issues to licensees recommending full fact finds before providing advice. The FASEA Code of Ethics in Standard 6 also requires full fact finds that conflict with the law permitting scaled advice.’

While SAFAA does not consider that changes need to be made to the law concerning limited or scaled advice, it is of the view that ASIC should reconsider its conflicting views on limited advice and ensure its reports to licensees are consistent with the provision of limited advice. SAFAA has also asked ASIC to develop sample statements of advice that are simple, concise and effective and reflect how stockbrokers provide limited advice in practice.

‘Standard 6 needs to be removed from the FASEA Code of Ethics,’ says Ms Fox, ‘and FASEA must add commerce, economics, business and finance degrees from established Australian universities to the FASEA list of approved courses. Financial planning qualifications must not be the only approved courses for financial advisers, as stockbrokers provide a different service. And the FASEA exam content needs to recalibrate to cover the spectrum of advice services so that it is relevant for stockbrokers and investment advisers and not just financial planners.’

SAFAA’s submission to ASIC is available on its website.

Judith Fox
0408 667 246