An industry body has called for immediate action to amend the FASEA code of ethics if ASIC is serious about encouraging the take-up of scaled advice, as the government put its support behind the regulator’s industry consultation on the issue.
In its submission to ASIC’s Consultation Paper 332 on removing barriers to advice affordability, the Stockbrokers and Financial Advisers Association said it was “vitally important” the regulator collaborate with government to update the code and give practitioners more leeway to provide compliant scaled advice.
“While there is nothing that either industry or ASIC can do to change the FASEA standards without parliamentary intervention, SAFAA considers that it is vitally important that agreement is reached between ASIC, the industry and government about the changes that need to be made,” the association said.
“Standard 6 needs to be removed from the code. Continuation of Standard 6 in its current form will defeat any efforts by ASIC to provide guidance on scaled advice.”
Standard 6 of the code states that advisers must “actively consider the client’s broader, long-term interests and likely circumstances” when giving advice.
While FASEA guidance has indicated the standards authority considers scaled advice permissible within the framework of Standard 6, FASEA recently conceded it had not sought legal advice as to whether such guidance was in conflict with the code’s wording.
“While this standard remains unchanged, advisers providing scaled advice risk being found to be in breach of the standard by failing to take into account a client’s broader, long-term interests and likely circumstances,” SAFAA said.
“A stockbroker should not be required to advise a client who telephones them to buy BHP shares to place their funds into a term deposit instead or consider their insurance needs.”
The association said FASEA’s guidance on the code’s application had been “unhelpful and confusing”, and that further guidance or examples around scaled advice from the regulator would be irrelevant if Standard 6 remained in its current form.
As ASIC’s consultation period for CP 332 came to a close on Monday, Minister for Superannuation, Financial Services and the Digital Economy Jane Hume said it was important for the industry to have its say on where regulation needed to be improved.
“The government is focused on supporting the advice industry with fit-for-purpose regulation, while maintaining consumer protections,” Ms Hume said.
“We know that some interpretations of current regulatory settings are creating barriers to consumers seeking good-quality, affordable personal advice.
“The government supports a well regulated and vibrant financial advice sector that supports advisers seeking to help Australians make informed decisions about their personal finances and to make better use of their savings in retirement.”
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