However, who is going to hold licensees accountable for the compliance with the legislative requirements – who will be the gatekeeper?

Under the Corporations Act, holders of an Australian Financial Services License (AFSL) are fully responsible for the appointment, training, supervision and compliance of their authorised advisers. 

Recent history has proven that AFSL holders, and in particular large financial institutions, have been woefully under-resourced and inadequate in the supervision of their advisers and the maintenance of standards. For example, back in 2014, a boutique firm similar to Hewison Private Wealth with only six senior advisers had more compliance resources than the entire CBA Financial Planning covering some 600 advisers.

What concerns me greatly is the complaining within the financial services “industry” regarding the added cost to advice brought about by the proposals and complaints about the burden of meeting the proposed education and compliance standards for “experienced” advisers.

Firstly, there has been ample opportunity to step up to the mark with the inevitable shift toward professionalism improved standards on the cards for some time.

Secondly, compliance with the law is simply best practice and any company worth its salt would have put systems into place that impose compliant practices on its’ employees and the appropriate supervision and management of those practices.

I have no sympathy for those who are now claiming to be put out. In my opinion it simply confirms that licensees have simply ignored these requirements in the past.

Solution

Less greed and more accountability will be the key to successful implementation of the reforms and an improved industry reputation. 

I suggest the introduction of a compulsory, user-pays audit mechanism to force licensees to be accountable and measurable rather than the current system that is reactionary.

It is obvious that ASIC does not have the resources or the infrastructure to implement a licensee audit. A professional organisation like the Financial Planning Association (FPA) however, has the appropriate infrastructure and under a user-pays system, could conduct the required audit program in co-operation with ASIC.

I call on Minister O’Dwyer to give serious and urgent consideration to the formation of a co-regulatory model that would see ASFLs and financial planners subject to a compulsory three yearly audit, subject to sanctions for non-compliance and a mechanism for ensuring rectification.

If the government is really serious about providing the Australian consumer with a properly governed financial planning profession, the proposed new standards need to have a robust compliance and regulation regime, complete with enforcement action. In my view, the co-regulatory model is the only option that provides a realistic, feasible and affordable solution.

The information provided above is general information only and individuals should seek specialised advice from a qualified financial adviser. Please contact Hewison Private Wealth for more information.