Options for making disclosure more accessible and ‘readable’ to consumers and more flexible for advisers, was discussed at a recent seminar on the future of disclosure.
Referring to the discussion paper on disclosure requirements MBIE released in April (see: MBIE Seeking Feedback…), MBIE Policy Advisor, Glen Hildreth, told the seminar audience that feedback had pointed out the undesirable effects stemming from the overly prescriptive nature of current financial advice disclosure documents, which he said “…can prevent businesses from engaging with consumers in a way that works for their business and works for their clients”.
“We’re proposing requirements that are a bit more flexible, so businesses can tailor their disclosure to the needs of their consumers and also to the needs of their business.”
“The new regime is going to cover many different types of activities with clients,” said Hildreth, who is leading the development of disclosure requirements for the new financial advice regime.
“We’re proposing requirements that are a bit more flexible, so businesses can tailor their disclosure to the needs of their consumers and also to the needs of their business.
“AFAs are required to produce often long and complicated disclosure documents that consumers don’t really read and if they do read it, they don’t really understand,” he added.
“RFAs and QFEs…have very limited requirements, so if a consumer is dealing with them they don’t necessarily know the factors that might be influencing the advice when they are dealing with those advisers.”
Commenting on a suggestion to create a one-size-fits-all document that would cover everything a person would need to know before going to see an adviser, Hildreth said:
“Given the breadth of activity in this regime I’m not quite sure that would work. I don’t think it would be read and it would be complicated and expensive for businesses to produce, so I’m not sure it’s necessarily the right way to go for financial advice.”
“To date, the financial advice regulations have kind of ignored the internet.”
He also mentioned the possibility of having more regulatory information available online.
“To date, the financial advice regulations have kind of ignored the internet,” Hildreth said, adding, “…people use it all the time so why shouldn’t we allow consumers to get information that way?
“I personally think it is really important that information is available online,” he said. “We need to make sure that consumers can find what they need in a way that works for them, before necessarily having to pick up the phone or having to come into an office…”
He said MBIE had also received many questions around the timing of disclosure, leading them to believe there has perhaps been a slight misconception that they are suggesting a disclaimer has to be presented at every conversation with a client but rather, “We’re proposing that information gets disclosed to the client as it’s relevant to them”.
“The main issue we’ve been struggling with is, on the one hand we want to allow flexibility so that businesses can do what works for them and their clients, but we don’t want businesses to operate in complete uncertainty,” he explained, “…so there’s this trade-off that we’ve got to make.”
The discussion paper proposed certain types of information be disclosed to the consumer at three different points in the advice process:
- Before advice has been sought
- Once the nature and scope of advice is known
- When a recommendation is being made
“There’s always a point where the adviser realises what the client wants and there’s always a point where the adviser makes a recommendation,” said Hildreth.
He added hearing from advisers during the consultation period was valuable for MBIE explaining, “…the chance to hear what will and won’t work in practice really helps us ensure that the regulations will work”.
An AFA previously spoke out that greater disclosure would benefit the industry (see: Greater Disclosure Will Help…) while our recent poll results suggest that more than half of advisers don’t think increased commission disclosure would be a good idea.
Click here to make a submission to MBIE by Friday, 25 May.