Super victory for advisers, despite ASIC criticism

Despite recent criticism by the corporate regulator, financial planners have won a major concession that will allow them to recommend clients change super funds, even if a client’s existing fund is not on an adviser’s approved product list.

The recognition, contained in new super-switching guidelines issued by the Australian Securities and Investments Commission (ASIC), represents a shift from an earlier ASIC position, which stated that planners were not able to advise where a client’s current fund was not on the approved list.

It comes despite criticism contained in ASIC’s recent report into the super switching recommendations of advisers, which concluded most advisers gave little or no consideration to a client’s current, or ‘from’, fund when giving a recommendation to switch.

ASIC has nevertheless warned advisers of “professional indemnity and other issues” potentially arising from advising clients to switch funds where a client’s ‘from’ fund is not on the approved list.

The corporate regulator’s guidelines state that if a client’s ‘from’ product is not on the approved list it will “generally not stop advisers from giving super switching advice”.

By contrast, the regulator’s position in draft guidance released to the industry for comment earlier this year was that if a client’s ‘from’ and ‘to’ funds were not on a licensee’s approved list, then an adviser couldn’t advise that client.

Financial Planning Association (FPA) manager policy and government relations John Anning said ASIC had accepted industry suggestions that an approved list is “not a requirement of the FSRA but rather a risk management tool that ensures advisers are acting within the scope of their authorisation”.

“It doesn’t necessarily follow that if a fund is not on an approved list there is no way an adviser could get that advice themselves, or tap into it within their licensee.”

Anning described the new guidance as a “welcome acknowledgement from ASIC that there are practical ways of addressing a situation where a client’s ‘from’ fund is not part of a licensee’s approved list”.

He suggested advisers should talk to their licensees in this instance, as “some insurers are saying that the PI cover will still apply if a fund is not on a licensee’s approved list but has been considered and approved by the investment committee that looks after that licensee’s list”.

However, he said that “some insurers might apply a rigid stance and in these cases advisers would not be able to advise on those products”.

“We get the general impression insurers are being flexible about the products they will cover, but the fact remains that advisers are not going to advise on products that leave them exposed,” he said.

IFSA deputy chief executive John O’Shaughnessy said the association was pleased with the outcome of its deliberations with ASIC on the guidance.

“We appreciate the consultative approach taken by ASIC on this issue and believe a better outcome has been achieved for consumers and planners”.