Another interesting week in politics has passed with the departing Nationals leader making most of the headlines. But for those involved with financial services, there’s still all the background noise from a royal commission and the role of the regulator with interpreting ongoing changes for AFSL holders.

Last week the heat of reviewing reversed somewhat when Peter Kell from ASIC was on the ABC’s ‘Q&A’ program and Bert Van Manen of the Queensland Liberal party was throwing the questions. Of particular interest was a line of inquiry about whether there is any inequality by the regulator when examining the advice process offered by industry funds. It was noted that those funds made up about one-third of the industry and that advice is a growing service. The question is: ‘personal’ or ‘general’ advice?

This is a tricky subject because we all know the amount of attention being put on vertical integration among the banks and the industry funds aren’t noted for wide APLs and/or advice that allows the use other funds, even if it’s deemed to be in a member’s best interest.

More tricky, still, is the whole ambit of personal advice versus general advice and this is where many of the funds will no doubt want to have their cake and eat it too.

It’s very easy to sit in the ISA and throw criticism at the banks for vertical integration and all the staff incentives in the general advice area but some would argue people in glass houses shouldn’t throw stones. If the regulator determines that industry funds offering advice is “personal” (what else could it be when an SoA needs to be issued with all the caveats) then surely there can be no double standards?

Mr Kell managed to deflect the questioning as a ‘project’ that was not in mind at present but it does haunt a little because we all know the outcome could well be ugly.

The fact is we need industry funds looking after members’ interests and we know there is a huge demand for guidance at retirement. Common sense suggests we cut some slack so that sensible advice can be provided by the funds – but there’s the rub. No slack is cut in the private sector and more so, the amount of paper warfare is increasing, not decreasing, as the regulator looks to establish how and why advice can be proved to be in a client’s best interest. [Just what is the difference between a client and a member comes to mind.]

Surely this is an unwanted example of inequality? But perhaps in an ironic twist it offers a solution that may make progress – rather than tighten the Industry funds, why not pull back on the private sector and get some balance.

The elephant in the room with general advice will lead to the third leg of the argument which is limited licensing and its lack of tenure in the advice process. Somehow someone thought accountants could provide limited advice, (sounds like general doesn’t it) and boy is that a can of worms. Some 18 months into the fracas of not issuing licences to the accounting sector in a meaningful way but somehow extolling the virtues of the CPA personal advice regime we have exactly what?

Time to retreat and look at the drawing board because it isn’t working and if it gets the same rigour of review as financial advisers have, the financial services sector and personal advice will get another work out and another blow to consumer confidence.

Perhaps time will heal some of these wounds, but at the moment, all financial advisers really want is a level playing field, clarity and consistency in the definition of personal advice, and a process that enables low cost-effective advice to be discharged.

This is the real enemy behind all the noise: scaleable, effective low-cost advice is essential for the unadvised in Australia and we can’t have different rules for different providers. Perhaps the solution is to cut some slack and look at the bigger picture and meet the consumers’ needs.

Wouldn’t that be a welcome step in an inquiry?

First published: 28 Febuary 2018

*Written by Ian Knox. The views expressed are his own.