ASIC provides advisers a best interests break on DDO
Advisers have been handed some flexibility around the delivery of personal advice in the context of the Government’s new financial product design and distribution obligations (DDO).
While financial advisers have been left in no doubt about the degree to which they will be impacted by the Federal Government’s new DDO regime, an Australian Securities and Investments Commission (ASIC) consultation paper has confirmed that meeting their client best interest’s obligations will mostly suffice.
It said that while, generally, distributors of financial products such as licensees and advisers would need to take “reasonable steps” to ensure they are not distributing products other than to that product’s target market, this was moot where the provision of personal advice and best interests was concerned.
“A financial adviser is a distributor under the design and distribution regime,” the consultation paper said. “If a financial adviser provides compliant personal advice to a consumer in relation to a financial product, the advice will be tailored to the consumer’s individual circumstances.”
“When providing personal advice, and implementing the advice, the adviser is not required to take reasonable steps that will, or are reasonably likely to, result in distribution of a financial product being consistent with the target market determination,” it said.
The consultation paper said this was because “financial advisers providing personal advice are under legal obligations to take into account the consumer’s personal circumstances and provide advice in the consumer’s best interests”.
It said the rationale behind this approach was that “the law provides that the reasonable steps obligation does not apply to a financial adviser when the adviser is providing personal advice, or implementing the advice”.
“We consider that some guidance for financial advisers and distributors is useful for industry to understand our view on the relevance of the target market determination to the provision of personal advice,” the ASIC consultation paper said.
Recommended for you
Sequoia Financial Group has declined by five financial advisers in the past week, four of whom have opened up a new AFSL, according to Wealth Data.
Insignia Financial chief executive Scott Hartley has detailed whether the firm will be selecting an exclusive bidder for the second phase of due diligence as it awaits revised bids from three private equity players.
Insignia Financial has reported a statutory net loss after tax of $17 million in its first half results, although the firm has noted cost optimisation means this is an improvement from a $50 million loss last year.
With alternative funds being described as “impossible” for fund managers to target towards advisers without the support of BDMs for education, Money Management explores the evolving nature of the distribution role.
