Cutting red tape for financial advice will aid economic recovery

24 July 2020

SMSF Association Media Release

The SMSF Association fully supports the Federal Government’s stated ambition to grow Australia out of debt in the wake of the COVID-19 induced recession – and cutting the red tape that is stifling the financial advice industry should be integral to this goal.

Association CEO John Maroney says: “The Government’s measures to help alleviate the economic fallout caused by this pandemic have been necessary, but now is the time to consider how the country is going address a deficit that is the largest as a percentage of GDP since World War II.

“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.

“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.”

He says the economic impact of COVID-19 has highlighted the strains resulting from the system’s costs and inefficiencies, as well as just how many people who need financial advice are being excluded.

“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.

“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.

Maroney says that even though the advice relief measures introduced by ASIC earlier in the year appear to have a relatively low take up by advisers, 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.

“They have to 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.

“And it is not only the advice framework that is complex. Red tape is also causing a fundamental lack of information for advisers who need to provide timely advice based on myriad complex caps, thresholds and balances.
“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 are the advisers authorised to provide advice. This jeopardises the quality and efficiency of advice that is being provided.”
The Association also wants SMSFs to be able to play a bigger role in funding infrastructure as part of the economic recovery and has made a recommendation along these lines to the National COVID-19 Coordination Commission and the Federal Government.

“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.”