The Financial Planning Association of Australia The Financial Planning Association of Australia

It’s time to fix our complex and costly regulatory framework


The biggest challenge impacting financial planning businesses today is not retaining clients or attracting new business, but the overly complex regulatory system stifling productivity, writes FPA CEO Dante De Gori CFP®.

The evolution of the financial advice profession in Australia from a product-based sales model to a fee-for-service ‘advice’ offering has involved a long line of regulatory developments.

As our profession has grown and the role of a financial planner has changed, so too has the role that regulators play in overseeing the sector.

Unfortunately, each new regulatory impost does not negate its predecessor. There is no central system or single source of truth when it comes to the regulation of financial advice. In fact, it is hard to think of a profession as highly regulated by such a multitude of government agencies as financial planning.

An alphabet soup of regulators

The Australian Securities and Investments Commission (ASIC) oversees licensees, but not individual planners.

The Tax Practitioners Board (TPB) does oversee individual planners, but only on tax matters.

The Financial Adviser Standards and Ethics Authority (FASEA) provides no oversight of financial planners but sets standards for them.

Finally, the Australian Financial Complaints Authority (AFCA) oversees consumer complaints made against financial planners via their licensee.  It is worth noting that only 1.6 per cent of all complaints received by the authority in the past six months has related to financial planners. This figure has been trending downwards and is an important indicator of success.

ASIC, the TPB, FASEA, and AFCA all play a part in the regulation of the financial planning profession. And that is without considering the roles of APRA, AUSTRAC and the ATO in the regulation of advice (not to mention the imminent introduction of the ACCC into the mix).

The effect of this regulatory pile-up on the financial viability, productivity, and effectiveness of financial planning practices across the country is significant.

Each regulatory agency imposes its own unique flavour of governance on a financial planner’s business, from AFSL compliance to education standards. And each of these functions comes at a price.

The cost and complexity of regulation

In 2019, 61.4% of FPA members cited the cost of regulation as their greatest challenge, up from 54.6% in 2018.

The rising cost of regulation is ultimately being paid by clients as financial planners are forced to increase their fees to cover the bloated cost of compliance. Most practices are small businesses and compliance has become a significant overhead.

Some of these regulatory costs are rising at an unacceptable rate, thereby reducing the affordability of advice. For example, ASIC estimates that the industry funding levy for 2019-20 has increased by 38% on the previous year and 62% over the last two years.

Cost is not the only issue. The existence of multiple regulatory agencies and government bodies that each perform a specific role in the governance of financial planning practices has created an extraordinarily complex system. It is one that can best be described as fragmented and dysfunctional.

Having multiple regulators leads to inconsistency in regulation, with no single agency leading the oversight of financial advice. As a result, the frustration felt by advice practitioners about the growing wave of regulation will lead to a greater disconnect and future efforts from the regulators to ease the compliance burden will be met with scepticism.

The solution

Reducing this costly and overly complicated system requires government action.

The Morrison government is due to establish a Single Disciplinary Body in 2021 as part of its implementation of the royal commission recommendations. While little information has been given on what this body might look like, the FPA believes it is imperative that the single disciplinary body be used to consolidate the current regulatory framework.

A single disciplinary body must streamline regulation, not add to it. This consolidation would not only benefit financial planners by reducing costs and driving efficiencies but would allow them to potentially offer more affordable advice to more Australians. The fact remains that the majority of Australians seeking financial advice are unable to afford it. It remains an essential service largely reserved for the wealthy, who can continue to subsidise this complex and costly regulatory framework.

The single disciplinary body should assume key functions of ASIC, FASEA and TPB as they relate to financial advice, thereby having primary responsibility for government oversight of the conduct of financial planners, setting mandatory professional standards, investigating potential breaches of mandatory standards and law, and applying discipline.

A single disciplinary body should be a single source of truth. Improving the productivity of financial planning practices and those that regulate them is essential for the continued growth of the profession and the provision of affordable financial advice.