Advice should be split by legislation

Financial planning should be clearly split into two camps - aligned and non-aligned - and demarcated by legislation to provide transparency for consumers and clarity around adviser income and entitlements. 

Connect Financial Service Brokers chief executive Paul Tynan said this division would enhance the current Future of Financial Advice (FOFA) legislation and would follow moves within other parts of financial services. 

Tynan said that large industry funds, institutions and banks support aligned general advice and that it would not be difficult to make the separation in the area of personal advice. 

“Why don’t we have aligned legislation for non-independent advice and non-aligned legislation for independent advice (personal advice) and work together to ensure that the Australian advice profession is the world’s best - is it really that hard?” Tynan said. 

According to Tynan, aligned advice would be defined as where an adviser is in a salaried position and licensed by an institution, with restrictions on the ownership of clients and buyer of last resort (BOLR) terms in place. 

Non-aligned advice would be defined as where an adviser is a self-employed business owner without restriction on the ownership of clients, and is able to transfer them in the event they leave a licensee. 

Tynan said these distinctions were necessary to provide clarity for advisers who need to leave a licensee - or even the profession - and still be able to realise a financial outcome commensurate with the work they have done as a planner. 

He said that outgoing planners should not be penalised for using commission-based products in the past as “that was the only product that was available that satisfied the consumers’ needs at that time”. 

He also questioned the fairness of an employee working within a legal framework to accumulate capital but then facing the possibility of losing those earnings because of a change in the relevant legislation. 

His comments follow those he made in earlier this month where he stated the bulk of problems around FOFA were the result of “self interest groups lobbying intensely to ensure that the interests of their particular sector, company or association had priority”.