The Financial Planning Association (FPA) is to investigate the circumstances surrounding the enforceable undertaking (EU) provided by AMP Financial Planning (AMPFP) to the Australian Securities and Investments Commission (ASIC).
FPA chief executive Jo-Anne Bloch said the EU, which requires AMPFP to modify key aspects of the financial advice it provides to clients, would be “examined in a lot more detail” to see if there has been any breach of FPA professional standards.
She told Money Management that the FPA would be “seeking clarification from AMPFP … that there has been an adherence to FPA standards” by the dealer group and its planners.
“At this point, it’s a question of seeking further information about what happened to cause ASIC to seek an EU from AMPFP, and thereafter making an assessment of the situation.”
Bloch added that the FPA would be encouraging its members to “look very closely” at the EU agreed to by AMPFP, which resulted from a review of 300 files selected randomly from 30 AMPFP planners between October and April this year.
“The issues the EU appears to put on the table are issues between general and personal advice in the Statement of Advice (SOA), over which we have been wrestling with for some time now.
“We will consequently be telling our members to look at the EU closely to see if there are any issues or procedures they might need to address within their own businesses.”
She concluded that the EU, which found some AMPFP planners did not disclose a reasonable basis for advice when recommending a change in super funds, was “a step in the right direction if it takes us a step forward to getting clarification on these issues and to improving outcomes”.
AMPFP managing director Craig Dunn said the EU had resulted from AMPFP essentially taking a legal view of the principles-based FSRA [Financial Services Reform Act] that was different to ASIC’s view in “one or two” areas.
One of the areas related to the amount of advice that you need to give on the ‘from’ fund, and the other to the way costs associated with a new product are included in the SOA.
“We took a fairly narrow view of the level of advice you need to give clients on the ‘from’ fund, while ASIC took a wider view of the required level of advice,” Dunn said.
“With regard to the SOA issues, we took the view that we should refer to the PDS [Product Disclosure Statement] where those costs are set out, while ASIC’s view is that this is not sufficient, and that these should also be disclosed in a SOA.”
ASIC executive director of compliance Jennifer O’Donnell disputed a suggestion that dealer groups could be confused.
“We have a pretty firm view of the way the law operates in this area, and we don’t think it is particularly complicated to implement.”
O’Donnell added that the AMPFP EU represents a “fundamental shift in the primary focus of our surveillance activities away from targeting just individual planners towards targeting the licensee as the responsible entity”.
