Death by a thousand regulations
In Australia, thousands of financial advisers have left the sector after new regulations have forced qualified advisers to take new exams and follow highly detailed and prescriptive requirements.
Thursday, October 28th 2021, 9:14AM 
5 Comments
by Russell Hutchinson
For details of the trend, you can check out articles such as this one at IFA.com.au and this one at Professional Planner.
Last week, the Financial Services Council in Australia announced their plan to save the sector.
The way Australia’s advice sector is regulated, and indeed the way Australia’s financial services sector works from superannuation to accident compensation, is so different that it makes direct comparisons hard but some broad themes emerge:
- Advice has suffered death by thousands of new rules, adding to the complexity of the process beyond the capability of most small advice businesses – and arguably beyond the capability of most clients to understand.
- Headline measures that we recognise (such as disclosure of commission) are almost drowned among some that we find baffling, such as a requirement for a post-graduate level qualification in ethics. I don’t know anyone who thinks the industry is so complex that we’re all crooks until we have a level seven diploma.
- The time taken to prepare advice has risen to the point where it is no longer possible to charge a sufficient upfront fee to cover it for most clients – so the provision of plans to new clients is no longer economic.
The goal of the FSC’s proposals is to bring the working time required for the financial advice process down from 23.9 hours to 17 hours.
Think of that over two-thirds of a working week!
The facts of the matter must give the lie to all the economic impact reports that were prepared carefully, prudently, assessing each change as both necessary and affordable.
Some will still defend the changes as affordable – even while others will find rising evidence of the absence of financial advice for people on average incomes.
Fortunately, we have a different approach here.
Some advisers complain about the lack of clear guidance from our regulators because we have adopted a principles-based approach.
The advantage of our legal and regulatory approach is that we have more flexibility and fewer fussy rules that can leave you in technical breach even when you have fulfilled the spirit of what is required for the client - long may we hang on to it.
I am certain it will only be retained with a great deal of vigilance and engagement with those in our industry bodies that work with MBIE, RBNZ, and the FMA.
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Comments from our readers
and perhaps, the wrong people are being employed in those areas?
There is an almost giddy delight from these compliance and education people who view regulation not as being about the consumer but as a guaranteed income stream for them. Unfortunately very little of regulation is actually helping the consumer improve access an independent adviser. The banks meanwhile are waiting patiently on the sidelines.
To be clear I have no issue at all with the advice that we offer to our clients been monitored. I just wish the same level of scrutiny was also being applied to land agents and their industry. However when an adviser has to start spending time on things like "health and safety" especially when he/she might run their business from home and see their clients face to face infrequently I do have a problem with the relevance of that. I am sure 99% of our clients would also agree.
The compliance industry in the new Y2K scam for many New Zealand businesses including the financial services industry. Again I hope a change of Government will see this level of interference relaxed as the current lot running the country would wrap all of us in cotton wool if they could.
Until 2024 it's only going to get more and more complicated for advisers for the immediate future. Chin up!
however, being ethical serving clients/consumers in their best interests and giving them good advice, FIRST comes from the heart. it has nothing to do with qualifications.
there are crooks who will pass exams with flying colours, and they will probably know how to "keep" records. at the same time, really good and honest advisers who will struggle with exams and record keeping, but their clients never have any problems with them.
yup, it seems everybody is on the advisers' gravy train .... ethics comes to mind.
Regulation in summary has moved away from its core purpose of benefiting the consumer and now appears to be more about how much money can be extracted from an adviser's business. Big money to be made currently for some of these crowds hanging off the side of our industry. Talk about having a financial agenda!
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When good advisers are now forced to leave the industry due to sheer frustration that their time is being diverted from helping their clients then the consumer is actually being disadvantaged and this is totally the opposite of what regulation was supposed to achieve.
Hopefully a change of Government at the next general election will then see some of this compliance nonsense removed or scaled back.