Financial planners need protection on 'best interests'

Financial planners will need appropriate protections under the new Future of Financial Advice "best interests" test to ensure they are not unduly exposed to vexatious litigation.

That is the assessment of key superannuation industry organisation, the Association of Superannuation Funds of Australia (ASFA), which has used a submission to the Treasury to argue the importance of advice providers being able to scale advice with a degree of certainty.

"One of the more difficult issues in relation to scaling or de-scoping advice is what should be the obligation of the adviser and what should be the role of the client," it said. "ASFA is of the view that given the knowledge asymmetry between the adviser and the client and also given the fiduciary nature of the relationship, it is the adviser who, after making appropriate enquiries, is better placed to determine the scope of the advice."

The submission said that, on this basis, the notion of an agreement between the adviser and the consumer was not appropriate but there needed to be appropriate protections for the advisor so that de-scoped advice could be provided in a cost-effective manager without exposing the adviser to vexatious litigation.

The ASFA submission said the organisation believed a "reasonable steps defence" could be appropriate when the adviser had a duty to determine the scope of the advice.

At the same time, the ASFA submission has urged the Government to drop from the draft legislation provisions relating to approved product lists (APLs).

"We are of the view that as APLs are not a regulated arrangement, it is inappropriate to regulate them in the Corporations Act," it said. "However we do believe it is appropriate for ASIC to issue a regulatory guide in relation to them."