FSC raises moral risk of too many self-licensed advisers
Intrafund advice would continue to have a role to play and dealer group licensees would continue to be a source of necessary capital adequacy under a series of discussion points and recommendations contained in a Financial Services Council (FSC) green paper on financial advice.
The FSC document also makes clear its belief that the Government’s Design and Distribution Obligations (DDOs) will add yet another layer to the regulatory burden already being carried by the advice industry which will need to be addressed.
Reflecting its membership base among licensees, the FSC green paper makes clear the organisation’s view that they will need to continue to play a role notwithstanding professionalism and the rise in self-licensing.
The green paper said, “the current legislative and policy direction of advice affirms a role for licensees within the advice industry as well as providing a mechanism by which to promote consistency”.
“The introduction of new reference checking, information sharing requirements and breach reporting requirements for licensees reflects the importance of their ongoing role,” it said. “It is unreasonable for ASIC, or the incoming single disciplinary body, to supervise and monitor individual advisers consistently and sufficiently to the extent AFSL-holders currently do.”
“Removing this role would make it near impossible to monitor and provide independent audits of an adviser to the single disciplinary body,” the green paper said.
“Premature proliferation of a sector of solely self-licensed financial advisers, without the option to sign onto a Group AFSL while being individually registered, could create a moral risk for consumers. This could occur if individual advisers exit the industry leaving consumers orphaned and unremediated for misconduct.”
The green paper argued that “this consideration should influence future changes to the licensing of financial advice.
One of the green paper’s key recommendations is that “intra-fund advice should be permitted under Simple Personal Advice and Complex Personal Advice.
It argues that intrafund advice should not be defined separately, and be provided mostly as Simple Personal Advice, or where specific product recommendations are made, as complex personal advice.
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