It's one thing to have laws and regulations. It's another to be able to enforce them.
A lot has been written about the Future of Financial Advice (FOFA) reforms in its various guises over the past several years. There's a lot more to be said.
However, not a lot has been written about a decision that the Federal Government made earlier in the year which will have a direct impact on how these reforms (in whatever form) are enforced, and how financial advisers more broadly, are regulated.
That is the decision to cut funding to ASIC, to the tune of $120 million over the next five years. To give some context, ASIC's funding was in the vicinity of $350 million for the 2012-2013 financial year.
The FOFA reforms are significant and add an additional layer of laws and regulations that need to be regulated by ASIC. It would seem that ASIC would need more resources to regulate and enforce them effectively rather than less.
ASIC receives a lot of criticism in the industry. Just look at the comments on online publications such as Money Management where ASIC's performance is discussed (the recent article about ASIC's chairman Greg Medcraft being "fired up" over financial advisers is a case in point). That's natural - it's hard to imagine an effective regulator being lauded by everyone in the industry it regulates.
To the extent that ASIC deserves some of its criticism, I would suggest that a large reason for this is its limited resources. It has to do the best it can with the resources available. If a regulator is insufficiently resourced, things are more likely to fall through the cracks.
If you want laws to be enforced, you need to have resources in place to enforce them. There was scope for ASIC to do more without any of the FOFA changes. Arguably, increasing resourcing for ASIC in this area several years ago without any of the FOFA changes could have had a significant impact on the financial advice space.
But it's not an either/or call. If you want to improve the laws which regulate an industry, you need to ensure that they can be enforced. The Federal Government's decision to cut funding will have a comparable, and possibly larger, impact on how financial advisers are regulated than its "tinkering" or "gutting" (take your pick) of FOFA.