FPA head of policy and standards Ben Marshan told ifa that as FASEA guidance stated relying solely on the current wholesale investor definitions was a breach of the code of ethics, this needed to also be expressed in the Corporations Act to reduce confusion in the industry.
“FASEA, through the code of ethics, has already suggested that financial planners should consider the clients’ level of sophistication, and not just rely on a dollar threshold,” Mr Marshan said.
“If this is what planners need to consider, it should be spelt out in the Corps Act to ensure there is consistency.”
FASEA’s 2019 code of ethics guidance document suggests that advisers who do not produce personal advice documents for clients who have over $2.5 million in assets, but may not have enough financial literacy to understand the advice being given, would be in breach of Standards 1 and 2 of the code.
In its recently released policy paper, which also suggested a move to individual registration of advisers from the current AFSL model, the FPA called for an increase in the dollar value threshold of the sophisticated investor test, and for a method of automatic indexation to be provided.
The association also suggested a measure be inserted to assess clients’ financial capability as well as the dollar value of their assets before they could be classified as sophisticated.
Mr Marshan said the FPA did not “have a specific figure in mind” in terms of how much the test should be increased, but said given this piece of the legislation was last addressed in 2001, an update was needed.
“The current figures are over 20 years old and given the changes in the wealth profile of the country, it is appropriate to reconsider the figures, and even the tests more broadly,” he said.
“Income and assets don’t mean someone understands sophisticated financial products.”
it already has given advisers grief.
Well obviously you would produce appropriate levels of SoAs for those wholesale investors. The big benefit with wholesale investors is not having to keep renewing their informed consent for ongoing service fees. The real question behind all of this is why does “informed consent” for an ongoing fee agreement cease after 2 years (or 1 year, as per the current Treasury Draft Legislation) – when intrafund advisers get paid healthy salaries & BONUSES without ever obtaining informed consent from their fund members, who pay their cross subsidised salaries?
LPF. Suggest you move on from looking over the fence and whingeing about what other do/don’t do. If you find it difficult to get your clients to sign a document every 12 months that covers what you are going to do for them, then i think that is your bigger problem.
Correct, just get it signed at the annual review, which I am sure we are all conducting for all of our clients as we all service our clients for the fees they pay us… right?
This is all well and good for retiree clients who have plenty of time to come in for reviews and sign forms.
But busy professional clients want their service provided in different ways. They want adhoc emails and phone calls, rather than rigidly scheduled meetings. They want immediate notification when something important happens, but don’t want to waste time hearing about things that haven’t changed. They will defer and ignore paperwork they think adds no value and is a waste of their time. It is extremely difficult to get those clients to sign renewal forms every 12 months on the dot.
“Why are you wasting my time with this? Can’t you just keep doing what I happily pay you for?” is a fairly common response when you remind them.
Then if that is so, you will have no problem with ensuring the 1000 bonus collecting intrafund advisers do the same. Unless you just happen to be one of those bonus collecting advisers.
It is spelt out in the Corporations Act via the Corporations Amendment (Professional Standards) Act.
It’s time to realise that the FASEA Code of Ethics is the law people.
If the FPA is confused about that then I am very concerned. If they are not confused, then this is deliberate sowing of confusion for others. Either way I want more from our advocacy leaders.
Maybe he missed the memo as he was too busy making lego men?
Actually – the code doesn’t say anything about a change to the WS definition – the guidance does, and the guidance is now law (FASEA admitted in as much themselves this morning when they acknowledged their press release and “policy” document couldn’t allow licensees flexibility in setting CPD rules). So the FPA is actually right – and I’m sure they will explain it in all it’s lego glory shortly. But more importantly – FASEA needs to learn (and they will learn the hard way through the Courts) that they have enacted subordinate legislation, and the Corporations Act is clear on what the current WS investor test is – if FASEA wants it changed – they should support the FPA’s calls. An adviser can’t get in trouble for following the law – even if FASEA disagrees with its spirit.
Actually you could be in the wrong as the law is the minimum, the code imposes a higher standard. So you might be operating well within the Corporations law but be breaching FASEA standards. Seems like you’d be willing to take FASEA to court, but you’d be arguing about apples and oranges.