The Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) are at odds following the release of a parliamentary report on the Financial Services Reform Bill.
While the FPA has blasted the Joint Statutory Committee on Corporations and Securities findings in relation to both incidental advice and commission disclosure on risk products, the AFA is applauding the recommendations.
National president of the AFA, John Hibberd says subjecting non-industry professionals to the same licensing requirements as financial planners when they are only providing incidental advice is simply not commercial.
“We agree with the committee that if the advice being given is generic, then the person giving that advice should not have to be licensed. It’s ridiculous to say that all accountants, for example, or all bank tellers need to be licensed to give advice. It’s simply not commercial.”
However, the FPA’s Public Policy Manager, Con Hristodoulidis argues that there is no such thing as ‘incidental’ advice.
“The Committee’s argument that the investment advice given by accountants and lawyers is ‘incidental’ is a fallacy,” he says.
“Such advice is not considered ‘incidental’ by consumers who use it as a basis for significant financial decisions. Feedback from our members indicates that a significant number of consumers have lost money because of so called ‘incidental’ advice.”
Hristodoulidis further argues that consumer protection will be undermined if life advisers are exempted from disclosure obligations.
“The Committee’s acceptance of the argument that such disclosure requirements would act as a competitive disadvantage for life agents is an insult to consumers,” he says. “Consumers have a right to know where undisclosed incentives are biasing the advice.”
Hibberd argues that the FPA has got it wrong.
“There is no bias in the advice,” he says.
“The Committee found that in pure risk business, the commission does not affect the price of the product or its outcome, and so disclosure will not help a consumer to make an informed decision on insurance cover.”
He says that in the current draft of the FSRB, big companies employ salaried officers who do not have to disclose remuneration, whereas small self-employed businesses must do so, even when exactly the same product is being sold.
“This is not a level playing field,” he says. “And this inconsistency in remuneration disclosure will create a significant commercial advantage for those organizations who employ salaried advisers. We want a level playing field between advisers regardless of how they are paid.
We want good advice to be delivered and the consumer to be informed.”
