The document, seen by ifa and titled Amending s923A for the Post FOFA Era, is a joint initiative of the association and Mr Walker, a consultant to advisers at Smart Compliance and a former staffer at ASIC predecessor organisation the ASC.
Its release follows ASIC’s recent and controversial clarification of its reading of s923A of the Corporations Act, which announced advisers who do not meet the strict criteria outlined in the act can no longer describe themselves as “non-aligned” or “independently-owned”, or use other terms of “like import”.
The white paper argues that that the provisions of the Corporations Act outlining the legal definition of independent advice – which was drafted and enacted back in 2001 – “needs adjusting” to better reflect the realities of the post-FOFA financial advice landscape.
It also argues that “consumers need market clarity on advice choice decisions and protection from product failure” and that the current legislation does not aid consumer understanding.
One of the key problems with the current provisions of s923A is that it places “unrealistic parameters” on advisers, the paper argues, which has allowed the major financial institutions to “supress competition” from the “genuine independently owned advice sector”.
The paper points to hidden agendas from industry associations representing the institutions as a influence on the Corporations Act and section 923A.
“The uncommercial parameters of s923A and this ‘masquerading strategy’ of institutionally-aligned advisers has created the very confusing outcome for consumers where most advisers ‘look the same’ – we contend this is an intended and engineered outcome by the institutional and institutionally-aligned associations to assist their members,” the document states.
It also argues that FOFA has a loophole whereby SMSF administration and establishment costs are not being perceived as conflicted remuneration unlike other platform and investment product revenue.
“We are not advocating a return to platform rebates, we are just pointing out the inconsistencies in FOFA’s application and why SMSF structures can compromise the parameters of s923A,” the document clarifies.
The inability for advisers to meet section 923A while operating under an approved product list is another “flaw”, the paper argues, since it fails to take into account “the way PI underwriters view the risk in our market”.
“A low risk, well researched APL must be observed or cover will be refused by the insurers,” it states. “Considering it is mandatory for all AFSL holders to have adequate PI cover to maintain their AFSL and stay in business, this condition is simply out of touch with today’s market culture.”
Instead, the AIOFP and Mr Walker propose that the current requirement to have an unrestricted APL be removed and replaced with a requirement to have professional third party approval of APLs.
It also suggests that grandfathered pre-FOFA revenue be considered for conflicts of interest on a case-by-case basis rather than a blanket rule.
It argues that a more common sense and commercially realistic approach to the definition of independence would have broad consumer benefits, including adopting an Oxford Dictionary definition of terms such as “independence”, “rebate” and “commission”.
“A measure like s923A, if maintained as it currently is, will drive more confusion not less when consumers look to find an adviser with their best interests at heart,” it concludes.
The white paper is part of the AIOFP’s broader efforts to lobby for amendment of s923A since ASIC announced its clarification in June.
To access the full white paper, visit: https://www.ifa.com.au/tmp/s923Awhitepaper.pdf
Reform of s923A will be a topic of debate at Australia’s first IFA Convention on 7 September in Sydney. For more information, visit https://www.ifacon.com.au/
ASIC are doing what they have been instructed to do by the Minister.
Liberal or Labour is irrelevant.
The politicians may pretend to want a RC or beat up the insto’s all they like in public but look who buys the tables at each and every fund raiser.
Voter apathy is the cause and insto’s will continue to get away with their manipulations whist ever the public vote on popularity or some isolated issue basis.
plus all these politicians and bureaucrats need a place to work after their terms in government are finished who best to become the lobbyist. look at Anna Bligh for example, or Mike Baird, or Bob Carr, I could go on and on and on. the system is crooked, and the adviser is jammed time and again.
This is an issue that really needs to be sorted out. Previously as a planner within a big bank I had 1 insurer on the APL, now running a privately owned business I have 13 to choose from and have the ability to align a policy to the individual. The assumption that if you receive insurance commissions you are not independent gets under my skin when I carefully research the best product for each client on an individual basis. The alternative is the client pays out of their own pocket for insurance advice. Insurance commissions allow many more Australians to put appropriate insurance in place. When insurance commissions are brought in-line through the LIF reforms the only reason for a planner to recommend one product over another will be due to appropriateness for the client not one insurer paying higher commission than another. I would consider this to be independent advice and advisers in this situation should be able to differentiate themselves from the bank planners with limited APL’s.
Seems pretty damn obvious to me that ASIC have no intention of focusing on consumer protection laws at all with all the interference and hand-braking strategies they’ve adopted over the last few years. ‘Consumer protection’ is nothing but a disguise in my opinion.
They’re only intention is to complicate business for non-institutional advisers so much that many of us just leave the industry altogether so their left wing, industry superfund mates can come in and screw consumers over and make millions along the way.
Who’s holding ASIC to account these days??? They seem to be able to do whatever they please – without any supervision or correction.
Anyone can come in to any situation and nit-pick and find fault – which is ALL they do in my opinion. They add no impartial value to this industry whatsoever and very clearly, have their own hidden conflicted agendas at play. It’s just disgraceful.
There are thousands of honest hard working advisers out there that are doing amazing work for millions of Australians. Does ASIC care? No. Are they interested in the truth? Not one bit. Do they handpick information to satisfy their already preset agenda’s? Absolutely.
This recent legislation is yet another example of their conflicted motives.
And don’t forget O’Dwyer and her Institutional buddies doing everything possible to make the IFA sector tougher and let the institutions hide behind these false “dealer groups” in any name possible to hide the true institutional ownership.
O’Dwyer and ASIC, when will you make the Institutions clearly show who owns their advisers ?
ASIC had a predecessor, the ASC, which was terminated because it wasn’t seen to be relevant in that form. ASIC is now broken and needs to also be replaced. Clearly they can’t do their work professionally (LIF example) or unbiased (ISA & CPA) so need to be replaced in it’s entirety. Medcraft leaving is a good start…
Great initiative but will fall on deaf ears at ASIC where common sense does not factor into their decision making. Any changes to s932A would also be at odds to what all their comrades at Union Super think on the matter and given the political climate and a probable Labor win at the next election, anyone at ASIC can see the writing on the wall with all of Shorten’s talk of a banking/financial services RC and wont be at any great pains to make changes that wouldnt sit well with their soon-to-be masters