Hayne ‘a missed opportunity’: CPA

CPA Australia has called on the government and regulators to reduce regulatory complexity in the financial advice industry.

Rising costs and complex regulations are pushing advisers out of the sector.

CPA Australia has labelled the Hayne royal commission a missed opportunity as it called on the government and regulators to reduce regulatory complexity in the financial advice industry in a bid to stem the flow of advisers and accountants exiting the sector.

Rising costs and complex regulations are pushing advisers out of the sector at a time when the need for financial advice is growing, said CPA Australia head of public policy Keddie Waller.

“The sector is really at a turning point. We need to have efficient regulation because otherwise we’re going to end up with an advice sector that only services high net worth clients,” Ms Waller said.

“We have an ageing population with poor financial literacy and forced retirement savings through superannuation, so we want to encourage people to get advice.”

Acknowledging that the public’s confidence in the financial planning sector was “understandably” weak off the back of the royal commission, Ms Waller said the answer wasn’t just more regulation but a holistic, harmonised framework.

“One of the disappointing things for us to take out of the royal commission was that the interim report Commissioner Kenneth Hayne put out acknowledged that we already have a very complex regulatory framework that has all these requirements and overlays in it and what we don’t need is more complexity,” Ms Waller said.”

“Unfortunately, what we got out of the royal commission was 76 recommendations that are going to add complexity.

“So we see this as a missed opportunity. It could have been a great platform to do a holistic reg­ulatory review. Rather than for the government to keep tinkering and putting layers on to the existing framework, we really need to take stock and see where we stand.”

The financial planning sector was hit hard by damning revelations at the royal commission, including from disgraced former adviser Sam Henderson, who ASIC later found had failed to act in the best interests of his clients, provide appropriate advice and to prioritise client interests when providing advice.

The federal government has committed to taking action on all 54 of the Hayne recommendations, including introducing reforms to enhance the quality of financial advice and increasing the education and ethical standards of advisers.

Ms Waller warned that cost pressures from education requirements were contributing to the exodus of experienced advisers from the sector as well as fewer new advisers entering the market.

“That’s a bad thing for two reasons. One, you lose good quality advisers. Second, for new entrants coming in, they have to do a year of supervised experience,” she said.

“If you’re losing your experienced advisers, you’re losing the ability to actually mentor the next generation. The education reforms, because the bar has lifted, it means a handful of new advisers come into the sector so far, you know, compared to the thousands that are leaving.

“The bigger concern for us is this is going to have a really significant impact on regional and rural (Australia). Because we can’t see how under the new framework level, you’re going to actually attract new advisers into those communities.”