FSC white paper points the way for advisers – Life Insurance – Insurance News
Financial Services Council’s (FSC) plan to reform the consulting industry, which it says will save $ 91 billion over 20 years if implemented, is supported by other organizations peak.
The FSC published its proposed measures last week in a white paper, after launching a consultation in April to explore ways to address the many challenges faced by advisers, such as increased red tape, increased workload. cost burden and affordability issues that prevent consumers from seeking professional advice. .
“Our recommendations will improve the economy of the consulting industry, reduce the cost of providing advice to clients and increase the number of Australians who can access advice,” said CEO Sally Loane.
âCurrent regulations prescribe compliance obligations at every stage of the counseling process.
âThey are an unprecedented cost driver for financial advisors and consumers, and their expiration date has passed. “
A key recommendation from the white paper calls for raising the threshold below which consumers are identified as “retail customers” to those with assets below $ 5 million, from $ 2.5 million, and introducing an index index on inflation at the threshold.
The white paper also proposes to remove the so-called safe harbor steps to comply with the Best Interest Duty rule and to replace the “complex” advice reporting regime with a “simpler, consumer-centric advice letter”. “.
In addition, the government should reform or remove the definition of “advice on financial products” in section 766B of the Companies Act and legislate on the definitions of “personal advice” and “general information”.
KPMG’s analysis shows that if the key reforms regarding Safe Harbor, the advisory letter and the simplification of advice categories are implemented, the cost of providing advice would be reduced by almost $ 2,000 per client, or 37 %.
âFinancial advisers are experts at helping consumers make complex financial decisions, and too much of their time is spent fulfilling ‘back office’ compliance requirements,â Ms. Loane said.
âTackling the burden of compliance will reduce the time it takes to complete the advisory process from 23.9 hours to less than 16.8 hours per client.
“We call on the government to commit to our plan.”
The Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) say they support the White Paper’s proposals for the industry.
FPA CEO Dante De Gori said the white paper aligns closely with the leading body’s five-year political platform roadmap that was launched last year.
“The publication of this white paper has demonstrated the FSC’s commitment to join us in the discussion on how to put the delivery of advice in the hands of professional financial planners and within the reach of all Australian consumers,” did he declare.
âThe financial planning profession will now benefit from a stronger and unified representative voice on the issues most critical to it. “
AFA Politics and Professionalism GM Phil Anderson says the white paper is an important contribution to the ongoing debate about the need to correct the regulatory regime for financial advice.
“We particularly welcome the recommendation on removing the safe harbor steps, changing an SOA to a letter of advice and the recommendation that financial advice be tax deductible,” he said. declared.
The Advisors Association also supports the FSC recommendations, with CEO Neil Macdonald saying the proposal calling for the separation of product and advice, if passed, “would represent a giant leap” for the industry.
âIt would help consumers better understand when they are receiving financial advice and when they are just receiving general information from a product supplier, for example,â he said.
Synchron director Don Trapnell says many of the FSC’s proposals make sense, but he is disappointed that the white paper failed to recognize the need to separate risk advisers from financial planners, especially with regard to l education and training.
âSpecialized risk advisers provide different services to financial planners,â he said. âIt doesn’t make sense for them to have the same qualifications or to have to go through the same educational program. “
Click here to access the FSC White Paper.