Conflicts officer needed for planning practices
Planning practices have been urged by the Financial Planing Association (FPA) to appoint a ‘conflicts officer’ in order to comply with new regulations, but the association is still not disclosing the details of the long awaited third instalment of its crusade to clean up conflicts for advisers.
The ‘conflicts officer’ suggestion was part of a new guide released by the FPA to give members step-by-step instruction on how to deal with the Australian Securities and Investments Commission’s (ASIC) Policy Statement 181, which came into force on January 1 and requires all planners to have in place policies to manage conflicts.
“Basically, it’s a matter of getting something out there... for the most vulnerable members, the ones that don’t have the resources of legal teams, and so on, to have something to give them guidance,” said FPA professional standards manager Paul Shevtzoff.
The guide specifically deals with particular conflict situations where disclosure is not an adequate solution to potential problems.
“We imagine this will be a very small percentage in most cases,” Shevtzoff said.
“I think there might be cases where clients themselves don’t appreciate the implications of the concept, even with planners who are being fair dinkum with the disclosure.”
An example given as a potential conflict of interest is where a financial planner recommends an accountant or solicitor with whom they are friends when they know that that accountant or solicitor is not adequately qualified to assist the client.
“I don’t think that means you have an obligation to hunt out the best person in town and only refer to them,” Shevtoff said.
“If you expect the person can do the job and the job isn’t rocket science, why not use them? After all, even ASIC will say the obligations on any individual financial planner is that they’re supposed to give appropriate advice, it isn’t an obligation to give the best advice.”
The conflict officer’s primary responsibility will be to identify, record and manage existing and potential conflicts of interest.
This will involve the person conducting a survey of relevant staff, getting them to sign a certificate stating that they have assessed their circumstances and identified no conflicts of interest. Any potential problems that are identified will be included in a report by the officer to be discussed regularly at board meetings.
Meanwhile, an FPA spokesperson said work was ‘well advanced’ on phase three of its bid to clean up the industry.
Last year, the FPA released a new code of practice on soft dollar remuneration and new guidelines on dealing with rebates and commissions from platforms and fund managers. But a third instalment of the reform process — guidelines on conflicts of interest which the FPA has said will go beyond those introduced by ASIC — are yet to emerge.
Recommended for you
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.
Former financial adviser Bradley Grimm has lost his appeal to have his sentence overturned in the Supreme Court of Victoria after judges ruled the conditions were “lenient” for his actions.
Following ASIC’s report into AFSLs’ adoption of AI last year, two DASH executives have urged financial advice practices to consider AI within their risk governance frameworks or risk regulatory scrutiny.
