The standards authority was asked by Liberal senator Slade Brockman of the Senate economics committee if legal advice was sought on its most recent guidance that intra-fund advice and other forms of limited or scaled advice was compliant with the FASEA code of ethics.
The guidance states that the code was “not seeking to prohibit” limited advice scenarios including SMSF, insurance, investment or intra-fund advice, but to ensure that it was “only provided when appropriate”.
“You are not expected to complete a holistic risk assessment or fact find for limited scope advice but would be expected to conduct sufficient information gathering to be satisfied the advice is in the client’s best interests as it relates to that scope,” the guidance said.
However, FASEA said it had “not taken legal advice” in respect of the issue of scaled advice and whether this was compliant with the broader wording of the code.
The issue of scaled advice has come to the fore recently with the release of a consultation paper from ASIC around the barriers to delivering affordable advice, with the regulator keen to encourage more advisers to offer limited advice services. ASIC is collecting industry submissions on the topic until 18 January.
ASIC senior executive leader for advisers Kate Metz told the AFA Vision conference in October that while the regulator had given guidance and examples to advisers around compliant scaled advice, it was frustrated by the policies of licensees that “don’t want advisers in that space”.
In a recent episode of The ifa Show podcast, BT head of financial literacy and advocacy Bryan Ashenden said many advisers at present lacked the confidence to be able to deliver scaled advice without fear of regulatory action against them, particularly due to the wording of the FASEA code.
“A challenge that will come up through the consultation and I know this is a challenge many advisers have had is that crossover to Standard 6 of the FASEA code, the one about ‘consider the longer-term implications and the likely circumstances’,” Mr Ashenden said.
“It’s led to many people being confused about does that mean I can or can’t provide advice.”
Mr Ashenden said contradictions between ASIC’s advice and the FASEA code could still be leading some licensees to hold back on allowing scaled advice, but that further clarity could be provided once some of FASEA’s responsibilities were rolled into ASIC’s Financial Services and Credit Panel.
“When you can hear it from the regulator saying if you do it along these sort of lines we’re not going to take action and it all seems compliant, that helps,” he said.
“We had ASIC doing that during the course of last year, but it’s again this whole piece about one regulator saying one thing, and the FASEA standards, whilst aligned, the way they are written sometimes creates that confusion.
“But perhaps this is another ultimate advantage we will see with some of those responsibilities moving into ASIC, that will help get that consistent approach out and help advisers to get more confidence.”
Standard 6….pushing the socialist doctrine “we are all in this together!”…so we must be responsible for the advice we give today ..until we die ??HUH?….tell that to the INDUSTRY FUNDS Fraternity..
Go have a look at the background of the FASEA “Standards Director”.
Kate Metz, not Karen!
Thanks Anonymous, that has been corrected. – SK
So FASEA have answered ASIC’s question. Now we can all proceed to losing our businesses because they are incompetent.
The real issue is cost versus time. At the end of the day, there is still a certain amount of information you need to collect to provide scaled advice to “new clients”. In most cases I’ll still need to know 80% or 90% of the information I’d need for full comprehensive advice. My compliance time and cost to provide that advice under current rules is still close to 100% of what I need to do for full comprehensive advice. What this means is that there is very little discount to someone asking can I afford to retire, versus supplying a full comprehensive retirement plan.
Scaled advice certainly has existing benefit for existing clients, where the leg work and compliance has previously been completed. For new clients however it’s a pipe dream under the current regime. Whilst it’s true the FASEA code (Specially standard 6) complicates this further over the standard best interest duty of the corps act in real terms the corps act in it’s own right still throws out the same issue.
If I client asks a simply question like, “when can I afford to retire”? That will still require me understanding their super and investment assets, risk profile, intended retirement funding needs, Centrelink eligibility, cashflow, expenditure, potential to save additional monies for retirement, health concerns or additional retirement funding goals etc.
A client never comes in and says, if I maintain a balanced risk allocation in an average performing fund and only require $60,000 p.a. and intend to fund until age 100 could I afford to retire at age 65 with this amount of assets in super and this amount outside of super if I made no other changes. Short of a client providing the parameters that tightly, I’m almost back to doing comprehensive advice levels of information collection and compliance. Same scenario if someone asks something simple like, should I pay off the mortgage or contribute this money to super.
Once it becomes personal advice (as in we are taking their particulars into account), scaled or limited advice becomes almost defunct due to the legislative requirements. By all means if it was general advice only, it would be very easy to answer those questions at an holistic level, but in my experience this limited advice is always related to personal advice.
I’ve read the ASIC submission document and it’s clear they simply don’t understand how the advice industry actually works. The lack of scaled advice isn’t due to Licensee restrictions. My Licensee is happy for us to provide limited or scaled advice, however we must still meet the corps act and now the FASEA code around the provision of personal advice and best interest dictates we do our homework which is timely and costly.
Short of the regulation changing, I fail to see how ASIC fails to comprehend this?
That’s because the entire leadership of ASIC are lawyers (with a couple of economists thrown in). They never have and seemingly never will employ anyone who has actually been a financial advisor, broker, etc.
Great description of the practical realities.
I’m not sure that ASIC really is as ignorant as they make out. They are just pretending to care about affordable professional advice for consumers. Their real agenda is to destroy professional advice, and push consumers towards accountants and/or union super funds.
YES…the industry funds are pulling strings in the background..they hate to see their members being advised outside their clutches
So what about the Adviser who was issued hauled before a “Hearing” with ASIC to determine if he was fit to hold a license due to the fact he recommended a professional earning $500k pa, with $240k in Super + max CC each year establish a SMSF to purchase the commercial property he was planning to operate his surgery out of, because this was “scaled advice” not taking into account his insurance needs with a full needs analysis….mostly due to the fact that the client declined to explore or consider this area, AND his premiums for “appropriate amounts” of cover would have been circa $80k pa? Oh and he hadn’t recommended managed funds or direct equities either.
Probably not fit to operate if they as the adviser scopes out insurance advice because they think the client can’t afford the cover. It’s called having a conversation and determining a trade off
So a client can’t decide that he would like to self-insure.
He needs to pay for advice he doesn’t want?
Had not taken legal advice when addressing scaled advice. A bunch of numbnuts. Writing up the codes we have to follow without getting legal advice on its merits first. This sort of action would have a planner deemed incompetent and be put under investigation
ASIC needs to change the way they operate and step up by providing a blueprint about how scaled advice will work. Tearing everything apart without a solution is not a professional way to operate.
Can anyone explain how Vertically Integrated, Super Fund owned or related party owned Advisers can provide Intra Fund Advice that is both :
FARSEA compliant &
BID compliant ?
Can you tell me how an adviser employed by any of the majors that have their own investment products move their investments or super to their own high fee products is either FARSEA compliant or BID compliant? Dixons, AMP, IOOF, etc all come to mind.
FASEA – We want you to provide this advice…
Advisers – Is it compliant with your code?
FASEA – We didn’t consider that…
It sure sounds like FASEA have failed to take into account the broader effects arising from Advisers acting on their advice and in doing so have clearly failed to consider the adviser’s broader interests and likely circumstances. Looks like they have breached Standard 6 and should resit an ethics exam to prove to us they are not a bad apple trying to rob us of our livelihoods.
What an absolute F##K up.
Can anybody agree on anything?
I have that many checklists to make sure i am trying to do the right thing that it takes as long to run through them as to give the advice.
And i still suspect if some one wanted find a problem in my files they would.
I am running on gut intstinct now, that i am doing the right thing thing for the client and it will pass the pub test…the rest is in the lap of the Gods.
I hope FASEA got someone a lot of votes and / or photo opportunities in Canberra because it’s no good for anything else.
Spot on “who knows”! It’s just a cluster fu$k now – and so muddled and complex you really can’t tinker at the edges and achieve any REAL positive change. If the industry can survive this, it will take a sensible pollie years and years to try and strip things back to a sensible level…what are the chances of that!???
left hand, right hand…basically NFI all-round; and lucky ASIC has people there who have been in the adviser’s world – just imagine if there was ONLY bureaucrats involved!?!?