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The government’s proposed reforms for the financial advice sector are overall positive, says one peak body, but they could curb red tape and regulatory overlap even further.
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Financial advice reform an opportunity to reduce red tape: CA ANZ
18 August 2021
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In a submission to the Financial Sector Reform (Hayne Royal Commission Response — Better Advice) Bill 2021, Chartered Accountants Australia and New Zealand (CA ANZ) welcomed the government’s reforms, but called for further reductions in regulatory overlap which it suggests could be achieved by combining a new two-step adviser registration process.
The first of the proposed two-step process would require financial services licensees to apply to ASIC for registration no later than 1 January 2023, before advisers would be individually required to apply to ASIC every year after that.
In a statement, CA ANZ said that the obligation for an adviser to be individually registered with ASIC should rest solely with the adviser, and not with licensees.
“When considering other professionals such as accountants, lawyers, doctors and engineers — all have individual registrations, completed by the individual themselves,” CA ANZ said.
“If financial advice is to truly be accepted as a profession by the community, it is time for the individual professional practitioners within it to take responsibility for their own actions, their own ongoing CPD and their own adherence to high levels of professional standards.”
CA ANZ also raised concerns over the proposed bill inserting a new definition of “qualified tax relevant provider” into the Corporations Act and Tax Agent Services Act that would see advisers held to new education and training standards, as set by the Minister of Financial Services — a portfolio currently helmed by Senator Jane Hume.
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The peak body said the move would be a mistake, and that another adviser description accompanied by yet another acronym would only foster confusion, for both the profession and consumers.
“We need to collectively find a way to sever the ties of tax financial advisers (TFAs) from the TPB and retire the TFA acronym as well, rather than creating a new one,” CA ANZ said.
The peak body suggests the government instead require advisers with perceived education gaps to complete a minimum annual number of tax-related CPD hours, via the FASEA CPD standard.
CA ANZ also suggested the bill move to make the Professional Year standard prescribe a number of hours of supervised tax-related activities for those new to the profession.
“If individual advisers have the appropriate knowledge, skills and experience to advise (which they must have under the FASEA Code of Ethics), then we see no need for AFSLs, corporate authorised representatives or, indeed, professional member associations to be registered with the TPB,” CA ANZ said.
“This would further assist with the separation of TFAs with the TPB.”
Under the proposed reforms, the corporate regulator would also become the sector’s single disciplinary body, and have the power to convene a Financial Services and Credit Panel if it believes that an adviser has breached their obligations under the Corporations Act.
It’s a measure CA ANZ supports. The peak body said it was pleased to see that not all obligations breaches would be referred to the panel, for fears that ASIC would become overwhelmed by menial offences.
In its submission, CA ANZ suggested ASIC design a simple process for handling minor infringements.
“ASIC will be ‘swamped’ with insignificant breaches that have no detrimental impact on clients but will take up valuable ASIC resources,” CA ANZ said.
“We recommend ASIC design a simple, streamlined process for matters that are clearly identified as ‘minor’ or will attract a minor sanction. Streamlining steps could include a single-member panel to determine sanctions for specified types of breaches.”
CA ANZ said that such a program would be costly, however, and urged caution on the introduction of any new or increased industry levies, which have in recent months seen swathes of advisers — most of them accountants — head for the exit.
Earlier this year, CA ANZ said that registry has dropped from about 20,000 members to 19,000 members over the last 15 months as a result of ASIC’s ever-increasing levy. Overall, the financial advice sector has seen adviser numbers fall to about 21,200, from 25,200 in 2017–18.
The peak body also highlighted concerns related to the selection process through which the Minister for Financial Services appoints industry participants to the Financial Services and Credit Panel.
Under the proposed reforms, the panel would be required to host at least two industry participants, which ASIC would be able to select from a list of eligible people picked by the minister. The panel’s chair, however, would always be an ASIC staff member.
“CA ANZ would like to understand how the minister will select industry participants to sit on this panel,” CA ANZ said in a statement. “We see a role for professional associations in nominating suitable candidates.”
The last of the reforms details the wind-up of the Financial Adviser Standards and Ethics Authority (FASEA) which would see all standards-setting functions handed to the minister, and a new financial advice exam administered by ASIC.
CA ANZ welcomed the measure, highlighting the cost and frustration that accompanied previous FASEA reforms.
“For the standards to be reviewed and improved in the future, we urge the minister to consult with, and listen to, suggestions from industry,” CA ANZ said.
“The industry provided FASEA with highly considered and detailed feedback to no avail. This has been disappointing and has led to poor outcomes.
“There is now a strong need for many of the FASEA standards to be improved, and CA ANZ is very keen to participate in this process.”
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