ROYAL Risks COMMISSION Restructuring - relationships Resources - - PowerPoint PPT Presentation

The Future for Financial Advice and Advisers Kevin Davis

Reputation Risks Restructuring - relationships Resources Regulation Remuneration Requirements (beyond 3R’s) Robo

ROYAL COMMISSION

Reputation

• Is there an inherent problem

with the financial advice industry?

• r
• Is it inappropriate business

models (business structures, governance, etc)?

“unresolved tension between a business model for financial advice that ties advisers commercially to product issuers while purporting to require them to act for the client.” Hanrahan, 2018)

Risks (Industry and Individuals)

$

2018

Industry Revenue Costs

2020

Profitability – Inverse “Jaws”?

Re-structuring & Relationships

• The end of vertical and horizontal

integration??

• Voluntary or enforced
• What scope for “independent”

financial advice firms/individuals ?

Resources

• Can “independent” advisers

access necessary information, & afford systems needed for giving good advice?

• How much will compliance costs

increase?

Remuneration

What remuneration arrangements are feasible and non-conflicted?

Regulation

• Approach to financial advice and financial

consumer protection introduced after Wallis Report (1997) arguably flawed

• Faith in Disclosure, Education, Advice 
• Unified regulatory framework for all financial

products & services

• Financial product  credit 
• Legal entity (firm) v individual focus 
• No “independence” requirement 
• No restriction on products available ?
• Financial consumer protection: ASIC v ACCC ?
• FOFA has failed to correct problems
• Murray Inquiry suggested reforms yet to

take effect

• ROYAL COMMISSION

Requirements

• What qualifications and experiences

should be mandated?

• Beyond: Reading, wRiting, aRithmetic
• RG146
• Professional Standards Act (March 2017)
• degree, professional year, exam, CPD,

Code of Ethics. FASEA

• Role of Industry Associations?

New Educational requirements

Source: ASIC

Robo Advice

Future Prospects ??

Some Issues

• Individual Licensing v Legal Entity Licensing
• Qualifications requirements
• Terminology changes (general advice)
• Registers
• Complaints Tribunals and Dispute Settlement, Penalties
• Self regulation & Codes of Conduct
• Vertical Integration (product manufacture, platforms, advice)
• Independence of adviser from product producer
• AFSL & ACL separation – financial products and credit
• Restrictions on financial products available to retail clients
• Fiduciary duty v Best Interests?
• Grandfathering?