Chapter 7 of the Corporations Act sets the legal framework that governs the provision of financial advice to consumers in Australia. Under this system, ASIC is tasked with the oversight of financial advice providers under the so called twin peaks model. However as discussed below, financial planning advice is also subject to the regulatory oversight of 7 other regulators including the Tax Practitioners Board, AUSTRAC, the Information Officer (Privacy), APRA, ATO, and the new Financial Adviser Standards and Ethics Authority (FASEA). The regulatory reliance on financial products, rather than a clear separation of framework’s products and financial advice for example, the legal requirements for the provision of – financial advice is based on the primary definition of financial product advice; and the secondary definition of personal and general advice. Exemptions are provided based on the type of financial products the advice relates to. Inconsistencies in the regulations do not reflect changes in business models and service offerings provided in the advice market particularly over the past 5 years since the introduction of the Future of Financial Advice (FoFA) reforms and other regulatory changes, and importantly changes in consumer expectations. (See Regulatory Burden section below for more detailed issues.) financial advice regulatory environment is also considered world leading and However Australia’s offers significant benefits in consumer protections. When assessing the appropriateness of the current system and its impact on competition, consideration must be given to, for example: Consumer protection outcomes Regulatory costs to business Increase in the cost of services for consumers Concentration of the advice market Supply side cost of regulation To ensure the regulatory system can deliver the consumer benefits of a competitive advice market, we suggest there is also a need to ensure appropriate criteria is used to assess what consumers’ value versus what the regulatory regime is delivering and the impact of the regime on competition and consumer outcomes. For example, anecdotal research indicates financial planning advice clients want value for money and quality service from their financial planner. However what is considered value for money differs amongst consumers depending on: their needs and reasons for seeking financial advice their financial circumstances, experiences and attitudes the type of advice service sought, and importantly, the outcomes they would like to achieve from the advice and whether the advice received meets these expectations Traditionally, consumer outcomes have been measured using criteria such as improved consumers’ understanding for financial affairs, greater confidence in their ability to make financial decisions, comfort about their ability to achieve financial goals and the structure of their financial affairs, and being in a better financial position because of the advice.
Chapter 7 of the Corporations Act sets the legal framework that governs the provision of financial advice to consumers in Australia. Under this system, ASIC is tasked with the oversight of financial advice providers under the so called twin peaks model. However as discussed below, financial planning advice is also subject to the regulatory oversight of 7 other regulators including the Tax Practitioners Board, AUSTRAC, the Information Officer (Privacy), APRA, ATO, and the new Financial Adviser Standards and Ethics Authority (FASEA). The regulatory framework’s reliance on financial products, rather than a clear separation of products and financial advice – for example, the legal requirements for the provision of financial advice is based on the primary definition of financial product advice; and the secondary definition of personal and general advice. Exemptions are provided based on the type of financial products the advice relates to. Inconsistencies in the regulations do not reflect changes in business models and service offerings provided in the advice market particularly over the past 5 years since the introduction of the Future of Financial Advice (FoFA) reforms and other regulatory changes, and importantly changes in consumer expectations. (See Regulatory Burden section below for more detailed issues.) However Australia’s financial advice regulatory environment is also considered world leading and offers significant benefits in consumer protections. When assessing the appropriateness of the current system and its impact on competition, consideration must be given to, for example: Consumer protection outcomes Regulatory costs to business Increase in the cost of services for consumers Concentration of the advice market Supply side cost of regulation To ensure the regulatory system can deliver the consumer benefits of a competitive advice market, we suggest there is also a need to ensure appropriate criteria is used to assess what consumers’ value versus what the regulatory regime is delivering and the impact of the regime on competition and consumer outcomes. For example, anecdotal research indicates financial planning advice clients want value for money and quality service from their financial planner. However what is considered value for money differs amongst consumers depending on: their needs and reasons for seeking financial advice their financial circumstances, experiences and attitudes the type of advice service sought, and importantly, the outcomes they would like to achieve from the advice and whether the advice received meets these expectations Traditionally, consumer outcomes have been measured using criteria such as consumers’ improved understanding for financial affairs, greater confidence in their ability to make financial decisions, comfort about their ability to achieve financial goals and the structure of their financial affairs, and being in a better financial position because of the advice.
sub026-financial-system.docx