ASIC deputy chairman Peter Kell has implored financial advisers to ignore the 'hype' on FOFA's fiduciary duty, arguing the regulator will not be expecting “gold-plated advice”.
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.”
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