Out of concern for the "dark and uncertain" future of the advice sector, Connect Financial Service Brokers CEO Paul Tynan has recommended overhauling the current structure of the industry - both in terms of licensing and regulation.
Arguing that the future viability of advice is "literally at the precipice," Tynan noted that adviser numbers are "at an all-time low" and the industry's "obsession with over-regulation is dissuading new advice entrants." For this reason, he said, politicians and stakeholders need a more forward-looking approach that doesn't hinge on the belief that changing the past will improve the present.
For example, Tynan pointed to the overall support for lifting education standards in the industry, but suggested the retroactive application of said standards was unnecessarily punitive. On a similar note, he said that ASIC's "preoccupation with look-backs" has resulted in advisers "living in fear."
"In all seriousness," he added, "no industry should be required to operate under a look-back regime of ten years or more. Imagine if politicians or the legal profession was required to adhere to the same requirements!"
Tynan also said that constant legislative tinkering has resulted in an overly complex regulatory environment for the profession, with advisers overseen by FASEA, ASIC, the ATO, the TPB, APRA, AUSTRAC, the ACCC and AFCA. If that weren't enough, he said, "new bodies are being established in conjunction with associations, lobby groups, academia, institutions, industry super, the media and list goes on. At what point do we say enough is enough?"
He also recommended consolidating industry associations, as the current number of them reduces their ability to be "taken seriously by Government."
According to Tynan, the complexity surrounding advice is also disincentivising the flow of new entrants who'd be needed to make up for all of the advisers now exiting the industry. He asked: "How can financial services attract the next generation of advisers when the current pathways actually inhibit new entrants joining the advice industry?
"Two decades of non-stop regulatory reform, industry rationalisation and uncertainty has resulted in the next generation of advisers preferring alternate career paths with more attractive work life balance opportunities."
Tynan also touched on the adoption of new technologies in advice - or lack thereof, given that the "legacy of industry domination by large institutions has been a lack of innovation." This is a topic we discussed in detail in our latest season of After Hours.
In order to solve all these problems, Tynan described a bipartisan working group as a "good start". This group, mind you, must not comprise "the usual retired judges, lawyers, vocal interest groups and individuals who have no practical experience running an advice business or face-to-face interaction with clients."
The other key element is financial literacy, which Tynan said should be a "national priority."
"People need to be able to manage their financial affairs in order to improve their standard of living," he said. "In addition, it will benefit the economy by improving the strength, performance and efficiency of the financial services system."
Without these changes, Tynan implied the advice industry lacks a "sustainable future" where "the consumer will finally be the winner and the beneficiary."
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