Current financial services legislation is too heavily focused on labelling advisers as product providers rather than advice providers, says a financial services lawyer.
For this reason, according to Imac legal & compliance principal Ian McDermott, Chapter 7 of the Corporations Act – which sets out the main provisions that cover financial services – should be scrapped and reworked
"There is no escaping the fact that the financial services laws were drafted ostensibly with financial products in mind," Mr McDermott said.
"We all know that the current financial services regime has developed from the previous life insurance and fledgling investment product industry.
"This has resulted in the law having a product focus instead of a strategic advice focus. Even advice, under the Act, is called 'financial product advice'.
While Mr McDermott acknowledges the FOFA legislation tried to "remedy" some of this by introducing the term 'financial advice', he adds that because it is not defined in the Act, this has "actually resulted in greater legal uncertainty".
"In my view, if the Act were to introduce a new definition of 'financial advice' as opposed to 'financial product advice' this would help break the nexus between advice and product and be another useful step in making this vital industry the respected profession we all want it to be," he said.
"But this would be difficult for regulators as such a definition could capture advice by real estate agents, accountants, lawyers and others. So, the definition would need to be properly scoped."
Mr McDermott added that the laws that financial advisers need to adhere to should be clearer and more concise.
"[There have been] numerous regulatory changes since the Financial Services Reform Act was introduced and Chapter 7 starts to read like a maze of unclear requirements to many licensees," he said.
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