The Certified Independent Financial Advisers Association (CIFAA) has asserted that the Quality of Advice Review will need to include two major changes to best benefit consumers.
Namely, according to CIFAA, real estate agents giving property investment advice should be licensed under the AFSL regime and the sophisticated investor definition should be thoroughly revisited.
CIFAA president Chris Young said consumers are at risk of receiving poor financial advice due to gaps in the current legislation.
“We’ve already seen issues surrounding property advice linked to SMSFs, but anecdotally, it goes much further,” Mr Young warned.
“You have estate agents providing unrealistic growth forecasts on property, comparing property with other asset classes like shares and often delving into tax advice surrounding negative gearing. That’s without considering the risks of relying on the performance of a single large asset,” he continued.
“ASIC’s role is to ensure that laws designed to protect consumers from poor advice are adhered to. When the law has big holes in it that allow some people to bypass those protections, everyday Australians often end up worse off.”
The association also called for a drastic overhaul of the sophisticated investor definition.
An adviser who deals with a sophisticated investor in accordance with current criteria is not required to execute many of the requirements necessary for retail investment advice, including satisfying the reasonable basis test and the provision of a Statement of Advice.
“There are many instances where our members have seen some very ordinary advice provided to someone that’s classified as being sophisticated,” Mr Young explained.
“The investor often has no real idea what they’ve been put into and the associated underlying risks. The notion that rich people are sophisticated investors is ridiculous.”
Rather, CIFAA called for the financial tests for sophisticated investors to be scrapped altogether and replaced by one that examines the financial literacy of the investors.
CIFAA suggested that this may include an obligation for individuals to hold formal qualifications in finance or to have completed a course that equips them to make informed investment decisions.
C-who? Never heard of them.
All other FP groups are arguing there’s too much regulation and documentation for retail clients and yet this group is trying to drag SI clients into the same quagmire of paperwork. Think that may be part of their value offering – more documentation!
Whilst I agree that real estate agents giving property investment advice should really be licensed under the AFSL regime, I suspect it will go the way of unlicensed accountants giving SMSF advice. All these property “gurus” will just operate under the cloak of darkness, say the investor set it up themselves, and not bother with being licensed. ASIC of course will do nothing.
how many associations in this country ? There is unified voice