Commentary around FOFA’s codification of the duty for advisers to act in their clients’ best interests is causing unnecessary headaches in the advice sector, the regulator told delegates at the AFA conference on the Gold Coast yesterday.
“There’s a perception out there that best interests means advice will have to be gold plated,” Mr Kell said. “[But] when we are looking at whether an advice provider has complied with the best interest duty, we will consider whether a reasonable advice provider would believe it is likely that the client will be better off if they follow that advice.
“So it does not require that they must immediately be better off following the advice … the impact of the advice will play out over time and may not have an immediate financial impact.”
The tests of reasonableness and likelihood – described by Mr Kell as “not uncommon in the law” – are a logical way for the fiduciary duty to be judged, he said, indicating advisers should not be overly concerned about regulatory oversight of compliance with the duty.
“We understand there are a range of issues to look at in terms of whether a piece of advice is in a client’s interest,” he said.
Mr Kell reiterated comments he made at the Financial Services Council conference in August – and similarly outlined by ASIC executive Louise Macaulay at the recent Finsia conference – that the regulator is seeking to conduct broad surveillance of the risk advice sector.
“[We see] concerns in the life insurance industry – the industry has thrown up problems over the years,” Mr Kell said, singling out the specific example of poor advice provided by former advisers of collapsed dealer group AAA Financial Intelligence (AAAFI).
The “real, meaningful harm” posed to clients by the “inappropriate and conflicted advice” provided by some AAAFI advisers is an example of the need for a fiduciary duty, Mr Kell said.
“This could all have been avoided very easily if the advisers had acted in the best interests of the client – very easy to address, very easy to rectify.”
So, its a good cop, bad cop routine is it.
Problem he is playing both roles at different times
ASIC needs to issue detailed guidelines with explanations and example to AFSLs, particularly those with risk advisers. Some AFSLs have completely overacted.
This is the age old problem with ASIC – on one hand issueing press releases to scare the troops, but never available to advisers or Licencees to talk through their rules
Then how come my SOA is now bigger and my dealer group keeps carrying on about safe harbours. I thought they were talking about Sydney Harbour initially. It’s not advisers you need to convince about Best Interests…..it’s the entities higher up the rung who largely control them.
WTF
Is the guy for real,
“There’s a perception out there that best interests means advice will have to be gold plated, Mr Kell said. [But] when we are looking at whether an advice provider has complied with the best interest duty, we will consider whether a reasonable advice provider would believe it is likely that the client will be better off if they follow that advice. “
I agree – until something goes wrong & then watch Mr Kell say ‘the standard displayed was not high enough or was inappropriate & conflicted or not in the best interest of the client’
I find the comments attributed to Mr Kell about Best Interests to be trite and downright insulting to a profession which has strived to make sure it meets this over-zealous definition. As to “gold plated” – of course my clients expect the very best advice, don’t yours?