Clear Labels, Better Outcomes: Learning from the UK Advice Model

The Australian financial advice industry could benefit from adopting a UK-style regulatory approach that clearly differentiates between different types of advice providers, according to Encore Advisory executive chair Tom Reddacliff.

The UK Model: A Blueprint for Success
"The UK model clearly delineates between restricted advisers and independent advisers," Reddacliff explains. "It's the concept of making it clear to the client what model they're engaging with and where it is the restricted model or the independent model."

This clear labeling system helps consumers understand exactly what service they're receiving and from whom. The approach could address current disparities in the Australian market, where consumers can have vastly different experiences receiving advice from relevant providers versus limited scope advice through superannuation funds.

Creating Fair and Proportionate Regulation
Reddacliff advocates for an appropriate regulatory environment that provides distinct guidelines for each model. "The [holistic advice] model should be under a best interest duty, but it's also making sure that what the restricted model has is fair and proportionate and not massively different," he notes.

The potential benefits of this approach extend beyond mere clarity. Without implementing a restricted advice service similar to the UK's, Reddacliff warns that Australia risks limiting the supply of advice. "That's not a good client outcome either. Too often in the industry we don't start with the client, and this is an opportunity to start with the client and work out how they want to engage with these services."

Streamlining Documentation Requirements
Drawing parallels with other professions, Reddacliff points to the accounting industry's more straightforward regulatory regime, despite handling significant business liabilities. "When they're documenting their advice to the client, rather than listing every single thing they considered in their head in a massive document, all they end up doing is summarising the conclusion," he notes, suggesting a similar approach could benefit financial advice.

A Collaborative Approach
The joint submission represents a unified perspective from three consulting firms with complementary expertise. This collaboration brings together operational compliance, technology, and business coaching viewpoints to present a comprehensive case for reform.

The proposed changes align with broader industry goals of increasing advice accessibility while maintaining high professional standards. By adopting clearer labels and more proportionate regulation, the Australian advice industry could better serve consumers while supporting sustainable business models.

This article draws insights from "Follow the UK and give advice clearer labels" which appeared in Professional Planner, September 2022.

Read the full article: Follow the UK and give advice clearer labels
(https://www.professionalplanner.com.au/2022/09/follow-the-uk-and-give-advice-clearer-labels/)