Regulating financial advice: Current oppurtunities and challenges

A paper presented by ASIC Chairman Tony D'Aloisio to the Financial Planners Association Conference, Wednesday 28 November 2007, Sydney.

Executive Summary

The key points of this presentation are these:

  1. There is considerable evidence that improvements are being made and the retail investor, the consumer, is better protected today than 5 years ago.

  2. There are a number of additional regulatory changes just completed or about to be completed which will add further improvements. For example, the compensation and insurance arrangements, EDR and training.

  3. There is, however, more to be done and that is why ASIC has set up a retail investor taskforce. The 5 drivers for that taskforce are:

    • imbalance in supply and demand;

    • growth in complex products for the retail sector;

    • concern on accessibility of advice;

    • high proportion of retirees needing special recognition;

    • lessons from the property failures.

  4. The taskforce will do two things. First develop a fact base with the industry. This will consist of:

    • in depth study of the retail sector.

    • assessment of who has and has not access to advice and the extent of financial literacy.

    • assessment of different advice models.

  5. The second taskforce objective, with this fact base, will be to address 7 specific issues with the industry:

    • disclosure documents – length and complexity.

    • statements of advice – whether 'one size fits all' is working.

    • compensation arrangements for retail investors – are they adequate?

    • lessons from Westpoint.

    • remuneration arrangements and conflicts of interest.

    • whether fiduciary duties apply and, if so, what that means.

      The taskforce will take into account international developments (e.g. USA and UK) in examining these issues.

  6. In relation to remuneration, in the context of the current legislative framework, ASIC will allow the market to 'vote with its feet' on the models investors prefer. To assist that process, ASIC will be active in applying the existing disclosure regime to its limits (as it has done in the unrated and unlisted area) so that retail investors can make an informed choice and, in effect, can 'vote with their feet'. While ASIC will not seek to pick 'winner models' (as such an approach could distort the competitive dynamics between models) it will be active in applying the existing disclosure regime.

  7. Unlike other sectors, the importance of the retail investor is one where ASIC will continue, as part of taskforce's work and otherwise, to maintain an active interest.

Download the full paper (PDF 166 KB)

Last updated: 28/11/2007 12:00