The Federal Government’s controversial Financial Services Reform regime has created extra costs and extra paperwork for the industry. Mark Beyer reports.
The Federal Government’s controversial Financial Services Reform regime has created extra costs and extra paperwork for the industry. Mark Beyer reports.
AFTER spending millions of dollars and countless hours preparing for Financial Services Reform, stockbrokers, financial planners, insurance brokers, accountants and superannuation funds may have to get ready for more changes.
The Australian Securities and Investment Commission’s executive director of financial services regulation Ian Johnston told an insurance conference in Perth this week that some aspects of FSR need to be reviewed.
He said “over documentation” and the advisory process were areas that needed attention.
“The legislation doesn’t recognise the ongoing nature of advice giving,” Mr Johnston told the National Insurance Brokers Association conference.
Industry speakers at the conference acknowledged FSR had delivered some benefits.
Insurance consultant John Hanks said the licencing process had given many firms a much better understanding of their business and led to better training and professionalism.
However, he said the industry was critical of the “extremely onerous” disclosure requirements, which included preparation of a statement of advice (SOA) every time they dealt with a client.
Insurance brokers believed there was no ‘value add’ and their clients thought the paperwork was ridiculous, Mr Hanks said.
Gannon Growden Schonnell financial planner Ben Devenish said it was frustrating that advisers needed to supply an SOA every time they advised clients.
Even for relatively minor matters, such as advising existing clients whether to accept Telstra’s share buyback, it was necessary to restate all of heir fees and charges.
“The client experience has been cheapened unbelievably,” Mr Devenish told WA Business News.
He also believes the extra paperwork means clients might find it harder to understand the advice they are given.
Duncan West, chief executive of insurer Vero, told the NIBA conference many advisers were no longer prepared to offer personal advice.
“The consumer is just not getting personal advice. Nobody wants to give that because of the compliance costs,” he said.
Alan Bishop, joint managing director of insurance broker Elkington Bishop Molineaux, echoed this view,
He said insurance brokers were frustrated that they were caught in a regulatory regime designed for the wealth management industry.
WA Senator Ian Campbell, who was partly responsible for introducing the FSR legislation, agrees there is too much paperwork.
“I think there are some fair criticisms there,” he told WA Business News in a recent interview.
“We always knew there would be high transition costs to the new regime, we knew that it would impose burdens on financial services businesses but we also new that it would create a fundamentally more sound environment.
“We have to get that right, there is more work to be done there.”
Mr Johnston said the next area ASIC could target was product disclosure statements, which were meant to be “clear, concise and effective” summaries of financial services products.
He offered little sympathy for firms that had erred in favour of longer, more complex PDS documents to cover all possible risks.
“There shouldn’t be any surprise because we have been saying that since the regime started,” Mr Johnston said.
To illustrate his point, Mr Johnston said ASIC recently reviewed two PDS documents for superannuation products.
“The 11 page one did the job far better than the 50 page one,” he said.
Mr Johnston said ASIC had offered to work with industry associations on model PDS documents for each sector, which could be used as a template.
Bell Potter Securities head of wealth management Heather Zampatti said the increased paperwork could be counter-productive because some people could miss out on getting advice.
FSR FACTS
- Financial Services Reform legislation took effect on 11 March
- Benefits include improved professionalism and staff development
- Negatives include increased paperwork and regulation
- ASIC wants to cut the voluminous documentation
