“The financial advice industry has reached an important milestone; it has become a profession. It is time the government modernised the current complex and costly regulatory framework to recognise and respect the professional judgment of advisers,” FSC CEO Sally Loane said.

“Current regulations prescribe compliance obligations at every step of the advice process. They are an unprecedented driver of cost for financial advisers and consumers, and are past their use-by date.”

The FSC White Paper recommends raising the threshold under which consumers are identified as “retail clients” to those with assets of less than $5 million (up from $2.5 million) and index the threshold to CPI (currently not indexed), abolish the Safe Harbour steps for complying with the Best Interests Duty, and abolish complex Statements of Advice for a simpler, consumer-focused “Letter of Advice”.

It also recommends breaking the nexus between financial product and advice, with the need to remove complex labels for different categories of advice that can transition to sustainable self-regulation by 2030 in which prior learning and pathways and individual registration are supported by the Australian Financial Services Licensing Regime.

The FSC’s proposals would also increase protection for up to 275,300 consumers who could be reclassified as retail clients and, therefore, brought into the consumer protection framework for financial advice, a change long sought by consumer advocates.

The FSC commissioned KPMG to undertake analysis of the FSC’s three key White Paper recommendations – abolishing the safe harbour steps, introducing Letters of Advice, and simplifying the categories of advice. KPMG’s modelling shows that not only will the cost of providing advice be reduced, but advisers will also have more time to spend with new and existing clients.

KPMG’s analysis shows the FSC’s key recommendations will reduce the cost of providing financial advice per client from $5,334 to $3,466 and would save financial advisers up to 32 per cent of time when providing advice to clients.

It would also allow advisers to provide advice to up to an additional 44 new clients each year and enable advisers to produce 2.2 Letters of Advice as opposed to 1.5 Statements of Advice per adviser per week.

Furthermore, it can reduce the time required to complete the advice process from 23.9 hours to under 16.8 hours per client.

“Long-term, the FSC’s reforms could generate cost savings for the advice industry of $91 billion over 20 years,” Ms Loane added.

“The FSC has welcomed the strong support and constructive feedback we received from the advice industry, consumer advocates, and FSC members. Having led this debate with our Green Paper in April, we now want to see the past few years of significant reform and professionalisation of the sector rewarded with a regulatory framework that trusts advisers’ professional judgment.”