The Future for Financial Advice and Advisers Kevin Davis Reputation ROYAL Risks COMMISSION Restructuring - relationships Resources Regulation Remuneration Requirements (beyond 3R’s) Robo
Reputation • Is there an inherent problem with the financial advice industry? or • 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) Profitability – Inverse “Jaws”? Industry Revenue $ Costs 2018 2020
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?
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