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.”
Of course the scope of the advice can be scaled, but there has always been a need to make appropriate enquiries and take into account anything you learn about the clients wider circusmtances.
Has anyone asked the consumer what they want??
Thank you Senator Hume, but when will you and your peers do something to stop the strangulation of our once-proud industry?
In ASIC’s secret submission to FASEA on the drafting of the Code of Ethics (that I received through [b]FOI[/b][b][/b]) ASIC originally admonished FASEA on their previous statement that the Code (specifically Standard 2 and 6) was wider in application than the current law.
ASIC responded in their secret submission by saying “…[i]it is [b]not correct[/b][b][/b] to say that the ethical duty is wider than the s961B obligation..and this has the potential to create industry confusion…we encourage FASEA to note that the requirement for a financial adviser to look more widely at the client’s interests and to consider the client’s likely future circumstances is [b]an existing requirement under the law[/i][i][/i][/b][b][/b]”.
There you have it. There is nothing new here. Scaled advice for a brand new client has ALWAYs required consideration of likely future circumstances. It is simply not possible/economic to provide scaled advice to a new client.