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An industry association has called on the government to simplify the regulatory framework for financial advice, with the economic impact of COVID-19 exposing the system’s costs and inefficiencies.
Following the government’s economic and fiscal update last week, SMSF Association chief executive John Maroney said that while the government’s measures to help alleviate the economic fallout caused by this pandemic have been necessary, it is now the time to consider how the country is going to address a deficit that is the largest as a percentage of GDP since World War II.
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“We support the government’s intention to stimulate growth and believe simplifying the regulatory framework around the financial advice industry can play an important role in this process,” Mr Maroney said.
“We therefore urge the government to prioritise financial advice reform by aiming to make it more accessible and affordable. The financial advice sector will play a crucial role in helping many Australians and businesses recover from this economic crisis, so it’s more important than ever that the government commits to reform.”
Mr Maroney said the economic impact of COVID-19 has highlighted that many people who need financial advice are being excluded due to the system’s costs and inefficiencies.
“The recovery period now provides an opportunity to rethink and design the professional advice framework. This includes the provision of ‘strategic advice’ that is decoupled from products and ‘scaled advice’ that could allow broader access to advice for consumers about how to structure their financial affairs,” Mr Maroney explained.
“This is critical because consumers find that advice comes in an ‘all or nothing’ package, demonstrated by the fact temporary relief was required just to ensure someone simply wanting advice on taking money out of super under the COVID-19 relief measures did not have to pay for a comprehensive Statement of Advice that is both time-consuming and costly.”
While the advice relief measures introduced by ASIC earlier in the year appear to have a relatively low take-up by advisers, Mr Maroney said the overwhelming feedback received from SMSF Association members is that it’s a step in the right direction.
“The reality is professionals have little room to move when asked to advise on a specific issue, illustrating just how many barriers they confront in providing efficient and affordable advice,” he said.
The head of the association noted that advisers have to now “contend with complex regulatory frameworks, with multiple regulatory regimes and regulators. Advice software and costs of compliance are substantial, and professional indemnity insurance is not only expensive but becoming harder to obtain”.
Mr Maroney said a lack of access to information on caps, thresholds and balances for clients is also making it difficult for advisers.
“Registered tax agents are able to get information from ATO portals but cannot provide superannuation advice, while financial (tax) advisers are unable to get information yet the advisers are authorised to provide advice. This jeopardises the quality and efficiency of advice that is being provided,” Mr Maroney said.
The association has now made a recommendation to the National COVID-19 Coordination Commission and the federal government to enable SMSFs to be able to play a bigger role in funding infrastructure as part of the economic recovery.
“We believe stronger infrastructure investment would allow government to turbocharge asset recycling to finance new job-creating infrastructure projects. It would have the additional benefit of offering stable, predictable income streams to fund Australians’ retirement,” he concluded.
