Source: Australia Government Ministerial Statements
Good morning everyone. Thank you Sally for the invitation to join you today for your Summit. It’s terrific to be able to speak to you this morning from Canberra, and to join you for the launch of the Future of Advice report.
The launch of this research is the first step in the policy debate on advice, and it is excellent that the FSC is leading that process as it launches a Green Paper informed by this research, industry and your input as participants.
As the Government progresses change and its legislative program, we welcome this debate and solutions from industry with a clear consumer rationale.
It’s excellent to see the FSC stepping up to set the policy debate on advice what it is and what it will be in coming years.
The financial advice sector is a state of real transformation at the moment. Not only is the sector going through the process of professsionalisation, but we’re also seeing the industry adapt and innovate in response to challenges of COVID-19.
COVID-19 has really put the industry in a pressure cooker and sped up some of the gradual change that’s been happening, particularly around client interaction and digital tools. Social distancing – a term we have never even heard of this time last year – has completely changed the way that advisers interact with clients.
The Government has been working closely with ASIC to ensure to make it as easy as possible for you to do your jobs in a COVID-safe way.
Now as we move into the recovery phase, financial advice is going to be as critical as ever.
Professionalisation of the industry
Despite the challenges we’ve all faced, I’m optimistic about where the industry is headed.
There are 900 students enrolled in FASEA approved bachelor degrees, and over 190 professional year candidates have joined the industry to date. As the industry continues to professionalise, I’m confident these numbers will only grow further.
I know many of you have expressed some anxiety about the FASEA exam – but I think it’s fair to say those fears have been allayed as the exams have progressed.
I was glad to finally see the legislation pass the Parliament in June to provide additional time for existing advisers to meet the qualification and examination requirements set by FASEA.
Of the 22,000 advisers on the Financial Adviser Register, close to 10,000 have already passed the exam. The remaining advisers have over one year and seven more exams available before the end of the transition period.
The reforms are working their way through the system and I’m confident standards will bring financial advisers in line with other professions – like lawyers, doctors and accountants.
The next step in this process involves the Government establishing the single disciplinary body for financial advisers.
It’s a significant step. As you might recall, Commissioner Hayne noted that the financial advice industry lacked a ‘credible and coherent system of professional discipline’, describing the current arrangements as ‘fragmented’.
The final report of the Royal Commission recommended a new disciplinary system for financial advisers, including specifically a single, central disciplinary body.
The Government agreed with the recommendation and we believe the body will streamline and encourage greater professional discipline in the industry.
Following consultation, we’re now working through the detail and we intend to introduce legislation by mid-2021.
We’re also looking to establish a forward-looking compensation scheme of last resort — a substantial step in rebuilding trust and confidence in the financial system’s dispute resolution framework. Again, we are aiming to introduce legislation by mid next year.
These commitments are the next step in ensuring that our financial advice industry becomes a true profession and we’ll have more to say on both of these commitments in due course.
Trust in financial advice
I recently listened to a speech that ASIC Chair, James Shipton, gave on trust and social licence in the financial system. He made some excellent points about the role of a professional culture in establishing trust in an industry – and I’d really like to touch on that in the context of talking about the future of financial advice.
The professional standards reforms were borne from concerns that the existing standards for advisers were not setting a high enough bar, eroding the trust that Australians had in financial advisers.
An ASIC report from August last year found that 1 in 5 Australians do not trust financial advisers. This distrust was one of the key barriers to seeking financial advice.
There is some way to go in rebuilding trust in this industry – and to come back to the point made by James Shipton – a clear professional culture and the features that come along with it will go a long way in remedying this trust deficit.
This sentiment has been the underlying thread behind our reforms to implement the recommendations of Commissioner Hayne. Our response to the Royal Commission was indeed titled “Restoring trust in Australia’s financial system”.
In that response, the Treasurer was clear in his message to the financial sector: “the interests of consumers must now come first. From today the sector must change, and change forever.”
Professionalisation – and everything that comes with it – educational requirements, a Code of Ethics and soon to be a new disciplinary system – is part of that change.
Red tape reduction
I know that the road to professionalisation has not been free of bumps.
Since taking the role of Assistant Minister for Financial Services, I’ve met with hundreds of individual advisers and brokers, one on one and in small groups, to discuss the issues facing your industry.
I want you to know that I am listening and I am taking on board what you’re saying. I am working to address your biggest concerns.
While we, like you, are focused on lifting the standards across the board for advice and implementing all the recommendations of the Royal Commission – I’m also constantly looking for opportunities for red tape reduction, identifying obstacles to productivity and profitability, and reducing the burden on your industry and its participants.
It’s not just because you’re noisy. Working to make your life easier, makes our life easier. Financial advisers are a critical part of our economy and will be critical in our COVID recovery. I’m not ashamed to say that the Government has a vested interest in ensuring that you can provide financial advice to as many Australians as possible without being tied up in red tape.
I’ve been working closely with ASIC, who understand the problems facing your industry, to come up with solutions that both make it easier to do your job and that meet our objectives.
To put it simply, this Government is committed to:
- A professional financial advice industry;
- With a lower level of overall regulation;
- Ultimately leading to better advice for Australians.
Role of technology in the future of financial advice
There is much uncertainty about what the future may hold yet it’s safe to say it’s going to involve a greater reliance on technology.
We understand that advisers have to price their advice to reflect the many hours of work they put in behind the scenes to provide the best quality of advice.
Often that goes way beyond the time required for a face-to-face meeting.
If consumers have to pay many thousands of dollars for a Statement of Advice, then many people who need that advice most will not be able to access it.
It’s not particularly useful if customers are paying for the manual production of hundreds of pages, much of which is boiler plate and they won’t read.
So what I’m focused on is helping advisers get access to the tools they need to deliver high-quality, compliant advice at an affordable price.
That can happen, but to do it, it’s going to need a greater role for technology.
And it’s going to involve the regulators taking a more forward-leaning approach to the rollout of technology that helps advisers do their job.
For financial advisers, it can unlock productivity.
It can enable them to deliver more good quality advice, to more people, in less time.
And most importantly, it can let them focus on the most rewarding and highest value-adding part of their jobs — spending more time with their clients, listening to their needs, tailoring solutions, and discussing their recommended actions.
I hope that I’ve made it clear that the Government is here to help you in achieving these things – we want to encourage the uptake of technology, and at the end of the day see better outcomes for your clients.
The Government is here to work with you – not against you. Our objectives are ultimately aligned – we want a financial advice system that is accessible and affordable, and one that ensures the quality of advice across the board.
With that sentiment, I’ll wrap up my remarks.
Thank you again for the invitation to speak today – it’s terrific to have to opportunity to talk about the future of financial advice in Australia in such a big picture way.
I look forward to delving into the FSC’s Future of Advice report and hearing about the conversations that happen through the Summit this morning.
Thank you – I’d be happy to take some questions now.