FASEA has conceded its guidance on scaled advice may not be legally reliable, adding to growing confusion around the compliance status of limited advice as ASIC prepares to collect industry views on the topic.
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.”
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