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ASIC: to fund or not to fund, that is the question

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2018-07-04

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Given the emerging outcomes of the Royal Commission, advisers and their Associations should re-examine their views of the proposal for the industry to fund some of ASIC's services. The FPA's submission last December to Treasury sets out, as would be expected, a reasoned detailed response.

Sometimes the detail overtakes everyday perceptions of a proposal and its likely outcomes.

If it came into being, two high level 'John Citizen' perceptions are possible: that ASIC is in the pockets of the wealth advice sector because they fund some of its operations; and that ASIC is getting more funding without it really changing anything.

It is in our interests to get this right and it is an opportunity for a change for the better. Paying the regulator to police the regulations is more of the same. The level of required compliance will lift following the Royal Commission. What is the framework for a possibly better outcome?

Paying for these services means there is a buyer and seller relationship and hence a contract. What are the obligations, duties and responsibilities of the parties? Consumers have the reasonable expectation of quality outcomes and effective delivery. We buy services in the expectation that we receive value and a benefit. Why not approach the Industry Funding Model for ASIC in the same way?

One of Australia's great successes was the Prices and Incomes Accord',  a series of agreements between Labor and the ACTU where unions would moderate their wage demands in exchange for improvements in the "social wage.

It is worth considering the possibility that an ASIC that sells its services and its customers (advice intermediaries) may enter into an accord' or contract, which in turn could lead to a better model and better outcomes.

For such a compact to evolve there needs to be strong leadership. There needs to be fire in the belly' from the leading advice professionals. What do we offer ASIC? What does ASIC offer in return? Maybe it is time that advisers acted like a union and claimed whatever rightful place we hold in society. There are plenty of professions that either have unions or act like them. What is our passion to get things right'? What do we mean by that? All the evidence is that existing clients are overwhelmingly satisfied with our services. Ambos and nurses take advantage of their reputation to get action. Why shouldn't financial advisers?

The relationship of regulator to adviser is complex. On one hand, the regulator has limited resources to oversee and prosecute. On the other, it needs to have good relations to get co-operation and insight, as well as encourage efficiency, honesty and fairness. Maybe it is time for both sides to fire up about what is demanded of the other.

The Royal Commission requires a new approach to minimise future debacles and I don't see this coming from a re-hash of past ways with more regulation, penalties, etc. If Treasury truly believes the wealth sector should pay for ASIC's services then it should go an extra step and make it contractual.

If we spend time on hammering out what the respective obligations are then we can get a better understanding of the real nature of the relationship and the likelihood of success. If we are going to retain' the regulator then what does the sector and its clients get that makes the outcomes better? What does the regulator get that measures improvements in quality? The extent to which obligations are met leads to performance measurement. What can be measured can be managed.' Days lost on a worksite is of equal interest to union and employer alike. Surely we have some common measures that both sides can take pride in?

Contractual obligations by the representative unions' / associations, backed by the members on one hand and the regulator on the other, can lead over time to better outcomes. Clearly the past system hasn't worked. Even the process of identifying the basic obligations would be worthwhile.

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