Financial advice could get more ‘affordable’ across the Tasman in the wake of a regulatory consultation process rolled-out last November.
Or maybe not.
According to the Australian Securities and Investments Commission (ASIC), the formal feedback to Consultation Paper 332 (‘Promoting access to affordable advice for consumers’) and follow-up discussions identified solutions “that we think will help industry participants to provide good-quality, affordable personal advice to consumers”.
“ASIC intends to move forward with these initiatives as resources permit,” the regulator says in its brief summary of the 466 submissions on the affordable advice paper.
As reported previously, the consultation was intended to discern ways to make advice accessible to a broader range of Australians after years of rising costs and a financial advisory industry that “has undergone considerable change in recent years”.
“Many large financial institutions have either sold or reduced their financial advice businesses,” the ASIC paper says. “At the same time, a number of financial advisers have either left, or signalled their intention to leave, the industry.”
ASIC commissioner Danielle Press, said at the time: “Good-quality affordable personal advice may help consumers make better financial decisions, especially during times of heightened vulnerability.”
In its wrap-up of the submission, ASIC found the increasing cost of financial advice was attributed to four main factors:
- business overhead expenses;
- statement of advice (SOA) preparation – including product and client research;
- regulatory and governance obligations; and,
- “conservative” policies of advice business licensee-holders that demand compliance above the legal standard.
Australian advisers must operate under a Financial Services Licence – similar to the system introduced into NZ this March with the Financial Services Legislation Amendment Act regime.
The ASIC summary found about half of those responding to the consultation already offered ‘limited advice’, which is a supposedly regulation-lite approach.
However, many respondents noted that the stripped-down advice option was poorly defined, still too costly while the “regulatory requirements for comprehensive and limited advice are the same”.
Advisers were also looking for more guidance on how ASIC defines “strategic advice”, which refers financial advice that does not involve any product.
Despite the difficulties in providing affordable, human-based financial advice to the mass-market, the survey found little enthusiasm for robo-advice among Australian advisory businesses.
“Most respondents do not provide digital advice services.
148 of 215 respondents said they do not provide digital advice and do not intend to in the future,” the ASIC summary says.
The survey found most advisers were not interested in robo-advice due to:
- lack of demand;
- consumer preference for human advisers; and,
- compliance concerns.
“ASIC has provided industry feedback on issues relating to law reform to Treasury for consideration as part of the Quality of Advice review,” the report says.