“After years of continual regulatory change, we have a framework that is complex and convoluted and hard to unwind,” the submission stated.

One of the issues impacting the provision of advice, the SMSF Association said, is the layer of compliance being imposed by AFSLs which prioritise self-interests rather than the provision of advice with a consumer focus.

“It can be argued that some AFSLs have a bias towards revenue generation and ensure that their compliance guidance attracts the least number of complaints,” the submission stated.

“AFSLs also seem to have a very risk-averse attitude due to the potential consequences they face from ASIC from a breach of regulation. This has forced AFSLs to create an additional burdensome layer of compliance to mitigate their risk.”

Based on feedback received by the SMSF Association, the submission stated that self-licensed advisers and advisers under smaller AFSLs experienced less friction with the role of the AFSL and were able to provide the advice consumers requested in a more affordable and efficient fashion.

“This was most prevalent with advisers who provide SMSF-specific advice. These advisers found their licensee understood SMSFs and were comfortable with providing SMSF advice that did not have excess compliance,” it said.

“In contrast, larger AFSLs were very restrictive in the provision of advice. Some members stated their AFSL did not have a great understanding of SMSF advice or did not focus on it at all.”

In these cases, the submission explained that ASIC guidance becomes law, which can make the provision of limited SMSF advice very restrictive.

“Large AFSLs were also reducing the offerings they provided with regard to SMSF and limited advice. This is because this type of advice may not be profitable when the required compliance and risk is taken into account,” the submission explained.

“When this occurs, AFSLs can remove limited-licence advisers from their books and advisers are then unable to provide advice and must begin looking for a new licensee. This is not conducive to affordable and efficient consumer advice.”

The submission said that expanding the ability for advisers to be self-licensed or more responsible for the advice they provide could be a consideration for a future advice framework.

“This may lead AFSLs to become ‘service’ providers in line with other professions. With the regulation of financial advice requiring individual registration and oversight, AFSLs may only be maintained to provide regulatory oversight of financial products and provide conduct monitoring and IT services to advisers, with advisers being ‘self-licensed’.”

Another issue raised by the submission was that AFSLs have different interpretations of legislation, regulation and guidance.

“This can result in a consumer receiving varying advice on what is required and allowed to be provided by their adviser when they seek advice,” it noted.

The submission also suggested that ASIC adopt a more consultative relationship with the industry similar to that of the ATO, which would help reduce tension between the regulator and industry.

“ASIC’s role as the ‘corporate cop’ tends to intimidate the advice industry, despite the fact both advisers and ASIC seek to achieve the same goal: to ensure consumers receive compliant and affordable advice,” it said.

“The ATO’s ongoing consultative relationship with the SMSF and tax industry has in fact strengthened their compliance regime due to their willingness to consult openly with industry, and this helps achieve improved compliance and efficiency for SMSF investors and professionals.”