Peak bodies representing advisers have responded to Treasury’s draft terms of reference for the upcoming Quality of Advice review, a recommendation from the Hayne royal commission.

Submissions from the Financial Services Council (FCC) and Association of Financial Advisers (AFA) touched on the regulatory burden and how reforms over the years have raised the cost of providing advice and as a result, led to affordability challenges for consumers.

“This review is happening at the right time, and is a critical review that must seek to address the continuing problems confronting the advice profession,” the AFA said.

“Importantly this review needs to identify solutions to address the existing and emerging challenges that could threaten continued access to advice for the many clients who already have an advice relationship and the many more potential clients who would benefit greatly from access to personal financial advice.”

AFA’s recommendations cover regulatory uncertainty, attracting new advice providers and giving existing clients a voice to provide their experience.

“In recent years the Parliament has introduced additional layers of bureaucracy with little consideration of the impact on clients and whether they value these measures and whether they were willing to pay for them,” the AFA submission said.

“We believe that this existing client perspective is critical to incorporate in order to make sure advice is affordable and valued by clients.”

In relation to regulatory uncertainty, AFA says the topic is a well-recognised issue and one that has been discussed in the course of parliamentary hearings in recent times.

“Licensees have been blamed for processes and rules that are considered unnecessarily risk averse,” AFA said.

“Licensees are uncertain, with respect to what the regulators may expect and whether their processes will meet, not only the standards that apply now, but also the standards that may exist in the future, when the actions of today might be assessed.”

The FSC says in its submission the review is an opportunity to chart a course of reform that eases the compliance burden on the sector.

There are several areas where the final terms of reference could be expanded on or amended to ensure optimal focus on the major challenges facing the sector, the FSC said.

The FSC proposes several refinements to the draft terms so that there will be a better focus on the structural impacts of the legislative and regulatory framework that are adversely increasing the cost of advice and different actors operating under that framework.

FSC says its proposals will also lead to stronger focus on the critical issues impacting licensees under this framework and developments that have impacted the levels of insurance coverage in the community in addition to the Life Insurance Framework.

“The review should produce recommendations for legislative change to reduce the cost of advice,” the FSC said.

“Regulator-led efforts to reduce the cost of advice while a positive step are limited in their effect on the legislative overlay that has exacerbated the overall costs of production.”