The Financial Planning Association (FPA) is standing by its push for an overhaul of the current licensing regime for advisers, despite major wealth managers voicing opposition to the plan.

Under the proposal announced this month, a professional registration scheme for individual financial planners would be set up, replacing the requirement to hold an Australian Financial Services License (AFSL) to provide advice.

The proposal is a cornerstone of the FPA’s five-year policy platform, and if implemented by the Government, will align with recent reforms to focus the regulation of financial advice at the individual practitioner level, the peak body says.

“One of our policy positions is that the future regulation of financial advice should occur through individual registration and oversight, rather than an AFSL system,” CEO Dante De Gori said. “This has triggered important discussions among the industry as we work together to create a better operating environment for financial planners and their clients.”

The current arrangement to oversee the provision of financial advice duplicates regulation, creates significant additional regulatory cost and introduces potential conflicts between the views of the licensee and the professional judgement of the financial planner, the FPA says.

Mr De Gori says the AFSL system should be retained to provide regulatory oversight of financial products and some services.

“Individual registration is an innovative concept for financial planning but not for other professions. It should not be confused with self-licensing or individual licensing under the existing AFSL system, which would still result in a duplication of regulation and unnecessary costs for financial planners.”

The FPA maintains licensees will continue to play a crucial role in developing, training, educating, and supporting licensed financial planners.

“Removing the AFSL requirement for financial planners won’t change this,” Mr De Gori said. “The AFSL does not make the planner, just as the hospital does not make the doctor, nor the law firm the lawyer.

“Individual financial planners are the ones who provide financial advice and the regulatory system should focus directly on their professional qualifications and behaviour.”

But a group of significant wealth managers – Fortnum Private Wealth, Centrepoint Alliance, Easton Wealth, CountPlus, Fitzpatricks Private Wealth and Paragem – criticised the proposal and insist the AFSL system plays a significant role in the oversight of financial advice.

“Licensees have played and continue to play a crucial role in developing, training, educating, and supervising licensed financial adviser,” their CEOs said in a joint letter. “Licensees have their own professional standards and risks to manage, placing these additional higher standards on the advisers licensed to their AFSL.

“The FPA proposal is a surprise and ill-considered given the hard work that the entire advice sector has put in to overcome historic shortfalls brought to light by the Hayne royal commission.”