ASIC will consult with industry in November to find out what is making scaled or limited advice so difficult to provide, according to the regulator’s senior executive leader of advice, Kate Metz.

Speaking on a panel at the Association of Financial Advisers’ virtual conference on Wednesday, Metz said ASIC has been looking at the issue of consumer access to advice “for a long time”. Recent conversations with the public, she explained, have revealed that consumers are often averse to ongoing advice and would prefer to receive it on an occasional basis.

“Time and time again we hear from consumers that they want to be able to access affordable and bite-sized advice,” she said. “So we know that’s what consumers want.”

ASIC believes there is a schism, however, between what consumers want and what the industry is most comfortable providing. “We also know that some segments of industry find it really hard to provide,” she added.

To combat the issue, Metz said ASIC will release a consultation paper next month “which specifically looks at what impediments there are for industry in providing affordable and limited advice”.

The advice lead acknowledged that ASIC had a role to play in bridging the gap by making the regulatory parameters of scaled advice easier to negotiate. The conversations between industry and the regulator have “matured”, she said, and both sides understand where the other is coming from.

“We are really keen to talk to industry about what it is within ASIC’s control that we can change to help industry,” Metz said. “We’re also asking industry to be true about what it is within their control that can be changed.”

Licensees in the way

Metz explained to the panel that the regulator has been frustrated with previous attempts to promote scaled advice within the industry, which it suspects is due in part to licensees’ reluctance to encourage sporadic advice at the expense of ongoing income streams.

“ASIC has given guidance in the past saying that we really support limited or scaled advice, [but] we are hearing from some quarters that licensees don’t really want advisers in that space,” she said. “I don’t know how widespread that view is but it’s certainly a view that we have been hearing frequently.”

ASIC has taken a dim view of the licensees’ role in advice provision recently, particularly when it comes to limited advice. In August Commissioner Danielle Press questioned whether overly conservative compliance divisions within licensees were hampering the provision of scaled advice.

Press said the level of compliance licensees were advocating was “definitely different from the base level of guidance that we give”, and that licensees’ reluctance to adopt ASIC’s compliance relief measures – assumed to be a reference to early access to super advice relief measures – was concerning.

‘We don’t want the status quo’

According to ASIC, the advice industry should go ahead and start coming up with new models to improve the advice gap rather than waiting for the regulator to pave the way.

Prompted by panel host, Australian Financial Review wealth editor Aleks Vickovich, on what course of action advisers should take in the interim, Metz was clear; “They shouldn’t be waiting.”

Continuing Commissioner Press’s line of thought that ASIC’s benchmark for compliance is lower than what the industry – particularly licensees – perceives it to be, Metz said there is a “misapprehension that ASIC is there to crack down” on providers. “Where we take action against people is for really egregious misconduct,” she said.

“The vast majority of financial advisers do the right thing,” Metz continued. “We want advisers to use their professional judgment. We want advisers to service their clients in a sensible way.”

The one thing ASIC isn’t keen on is for things to remain the way they are.

“We don’t want to continue with the status quo, where people feel they are unable to provide limited advice or where they feel trapped into producing lengthy documents that, you know, consumers are never going to read,” she said.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at tahn.sharpe@conexusfinancial.com.au
5 comments on “ASIC wants to know what’s holding up ‘bite-sized’ advice”
  1. Avatar Craig Lindner

    No wonder advisers are fleeing the industry in droves when ASIC plays games with us to protect them-selves from scrutiny by their political masters.

  2. Avatar Michael Gershkov

    Dear Kate, Danielle and the team at ASIC – thank you for your interest and concern because it is appreciated. The 2 big issues are that the cost to deliver scaled or “bite size” advice is not that different to delivering holistic advice. To address one issue for a client still requires an investment of 10 to 20 hours to consider all the options and variables which may be an hour or two less than to address four or five issues. Yes, the Statement of Advice will be 50 pages in length rather than 60 but we have created a system with many processes which come with costs and we need to cover these costs and make some money because we do run a business. It is true to say that all licensees add to the cost and complexity of advice delivery but they exist to service, support and supervise advisers. The simple reason why advisers need ongoing fee for service and holistic advice clients is because we are happy to earn less on the initial engagement with a client and then earn money to run our business over the long term as we help our clients achieve their goals and address their fears. This way, clients get their objectives and we do too. The average cost per hour for an adviser to service a client is $300. If I know the client in front of me only wants a short term band-aide solution, the initial meeting cannot be free (as it is now) and the cost per hour is now $500. AND the liability attached to deliver this single or simple advice outcome for this transactional client is no less but the risk is actually higher because I cannot ensure this client stays on track and true to their desired solution. Happy to discuss further so please call me on 0438 776 666. We are all in this together :-)

  3. Agree with the sentiment, but as the previous comments indicate, this is counter to FASEA’s requirement (October 5) to take the long term, broad based view of what is best for the client in ALL ways. There’s a disconnect with what many clients want and what Advisers are allowed to deliver.

  4. Very interesting comments.

    I’d be rather keen to hear ASICs take on FASEA’s latest guidance document and just quite what they make of it in reference to scaled, or limited advice.

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