No difference in treatment of scaled and holistic advice
The Australian Securities and Investments Commission (ASIC) has signalled it will be applying uniform rules to both holistic and scaled advice.
In an announcement accompanying the release of consultation papers covering regulations flowing from the Future of Financial Advice (FOFA) changes, ASIC made clear it was fixed on a uniform approach, saying "all advice is scaled to some extent".
"Advice is either less complex or more complex along a continuous spectrum (ie, there are not two categories of advice 'scaled' and 'holistic'," the regulator said.
"In general, the same rules, including the best interests duty, apply to all personal advice, regardless of the scope," it said. "It is possible to provide less complex advice in a way that is consistent with the best interests duty and the law generally."
On the key question of the best interests duty contained within the FOFA legislation, the draft ASIC regulations have emphasised the need for consumers who seek financial advice to be left in "a better position" if they act on the advice provided.
As well, ASIC has warned that it is more likely to take a negative view about planners not meeting their best interests obligations "if an advice model typically leads to a one-size-fits-all outcome - that is, the processes do not allow the client's relevant circumstances to be taken into account, or result in advice that does not reflect the client's relevant circumstances".
The ASIC consultation papers also lay out the regulator's expectations with respect to how planners can access "safe harbour" arrangements with respect to the best interests tests and lays out the steps which need to be taken for planners to be able to access safe harbour.
Included in those steps is an assessment of whether planners have the expertise required to provide the client with advice on the subject matter sought and, if not, to decline to provide the advice.
ASIC makes the point that the proposed new obligations with respect to the best interests duty applies to "advice providers" (planners) as well as to the licensee or the authorised representative.
Reflecting the increasing use of web-based advice, it said that where no individual provided the advice, the obligation applied to the corporate licensee or authorised representative.
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