ASIC releases limited advice guidance
Financial advisers giving limited advice will need to explain what advice is provided and what is not provided to meet best interests duty, according to the corporate regulator.
The Australian Securities and Investments Commission (ASIC) has released an information sheet on limited advice an example statement of advice (SoA).
ASIC commissioner, Danielle Press, said the regulator understood the industry faced some barriers to providing limited advice, including a lack of clarity about the regulatory requirements.
“We expect this guidance will provide regulatory certainty to industry and help reduce compliance costs. It will assist financial advisers in their efforts to make these forms of advice more available to consumers and assist them in delivering quality advice in a timely, affordable, and compliant manner,” she said.
The information sheet said when giving limited advice, advisers needed to clearly communicate the advice they were providing and the advice they were not providing, along with the implications of this.
“For example, when giving limited advice, it should be very clear in your SoA (if you are required to give one) what advice you have provided and what advice you have not provided, the implications of this, and why you have taken this approach,” it said.
“We consider that limited advice will be unlikely to meet the best interests duty and related obligations if the client does not understand any of the significant limitations or qualifications that apply to it.
“Clear communication can help you to be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products you recommend: see Standard 5 of the Code of Ethics.”
ASIC’s tips for providing limited advice included:
- Identifying the client’s reasons for seeking advice by asking open-ended questions;
- Putting your client first by declining to provide advice and referring your client elsewhere if you cannot act in the client's best interests when scoping the advice;
- Addressing advice topics that fall outside the scope of the advice;
- Making inquiries;
- Revising the subject matter of advice;
- Making inquiries to obtain complete and accurate information;
- Using processes and systems for scoping advice;
- Designing advice processes to ensure advice strategies come first; and
- Keeping records.
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