ASIC moves to undo some of the FOFA excesses
The approach ASIC has signaled it will adopt to scaled advice and the best interests duty is a welcome development for financial planning industry.
If one good thing could emerge from the current legislative and regulatory issues evolving across the Australian financial services industry, it should be the development of a genuinely level playing field.
Whether it is the Future of Financial Advice (FOFA) changes, the Stronger Super legislation or the Productivity Commission's review of default funds under modern awards, the objective should be to create an environment in which one sector of the industry is not advantaged over another.
Sadly, what is already obvious is that the FOFA changes have tended to increase the dominance of the major banks and institutions in the financial planning space, while it remains to be seen how the Stronger Super legislation will impact the superannuation space, albeit that further consolidation seems very likely.
Where the Productivity Commission review is concerned, the best possible outcome would be a system based on the best interests of employees rather than the vested interests of some of the industrial relations parties.
It is in this context that the industry should welcome this month’s release by the Australian Securities and Investments Commission (ASIC) of consultation papers dealing with the FOFA changes and, in particular, the regulatory approach it will be adopting to scaled advice and the best interests duty.
The ASIC approach to scaled advice would appear to represent a genuine attempt to inject some uniformity into the advice equation and to ensure that when advice is delivered it is premised upon common rules.
While well-intentioned, the Government’s approach to intra-fund advice created too many loop-holes and a very unlevel playing field. This is something that the regulator seems to be seeking to avoid with respect to the scaled advice environment.
This is what ASIC had to say:
- All advice is scaled to some extent – advice is either less complex or more complex along a continuous spectrum (i.e, there are not two categories of advice, ‘scaled’ and ‘holistic’).
- In general, the same rules, including the best interests duty, apply to all personal advice, regardless of the scope.
- It is possible to provide less complex advice in a way that is consistent with the best interests duty and the law generally.
In other words, ASIC is intent on consumers having all the same protections irrespective of whether they are receiving scaled or holistic advice. This is as it should be.
Indeed, it is entirely arguable that exactly the same approach could and should have been applied to the provision of intra-fund advice.
There will be those who argue that applying a uniform approach goes too far with respect to the provision of scaled advice, particularly within the superannuation fund environment, but ASIC should weigh such claims against the vested interests they represent.
Indeed, if ASIC had the necessary resources, it might be well served in conducting an audit of the provision of intra-fund advice in the same manner it audits the delivery of financial advice via its shadow shopper exercises.
Recommended for you
In this episode of Relative Return Unplugged, hosts Maja Garaca Djurdjevic and Keith Ford are joined by AMP chief economist Shane Oliver to take a look at what can be learned from 2024 as attention turns to what markets will do in the new year.
Join us for a special episode of Relative Return Unplugged as hosts Maja Garaca Djurdjevic and Keith Ford are joined by shadow financial services minister Luke Howarth to discuss the Coalition’s goals for financial advice.
In this special episode of Relative Return Unplugged, we are sharing a discussion between Momentum Media’s Steve Kuper, Major General (Ret’d) Marcus Thompson and AMP chief economist Shane Oliver on the latest economic data and what it means for Australia’s economy and national security.
In this episode of Relative Return Unplugged, co-hosts Maja Garaca Djurdjevic and Keith Ford break down some of the legislation that passed during the government’s last-minute guillotine motion, including the measures to restructure the Reserve Bank into a two-board system.
