ASIC Consultation paper missing Best Interest Test says FPA

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The Financial Planning Association (FPA) says the Scalable Advice Consultation Paper released today by ASIC is a good start to the process of providing guidance for financial planners and the FPA looks forward to working with ASIC on developing this further during the consultation period.

However, the FPA cautions that without the consideration of how this interacts with the ‘Best Interest’ duty this guidance still remains incomplete.

Since the initial Future of Financial Advice (FOFA) reforms were announced in April 2010, consumers and the financial planning profession have been waiting for solutions on how access to advice will be achieved and delivered more affordably to Australians.

As part of the FoFA reforms one of the key objectives Government promised to deliver is greater access to financial advice that is affordable and is in the clients’ best interest.

“The consultation guidance paper released by ASIC is a positive step but, in our opinion, does not fully deliver on this objective,” Mark Rantall, CEO of the Financial Planning Association said. “The FPA had provided clear feedback to ASIC on this issue and we strongly recommended that ASIC not release the consultation guidance paper until the Best Interest Duty had been formulated and incorporated as part of this guide.

Mr Rantall continued, “In releasing this consultation paper without incorporating the Best Interest Duty, ASIC may actually cause further confusion rather than guidance or clarification for consumers and the profession”

The FPA added that the draft regulatory guide still did not really address how a professional financial planner, who is competent and capable to deliver holistic advice, can provide scaled advice in a way that is efficient and effective for both the financial planner and the client.

“In addition to the absence of the important consumer protection issues of ‘best interest’, failing to consider any other aspect of someone’s financial circumstances other than superannuation is a worryingly narrow view of financial services that doesn’t reflect the range of considerations financial planners look at when providing financial advice,” Mr Rantall said.

The FPA is supportive of ASIC’s decision to expand the topic areas to those outside superannuation and we will, as part of the consultation process, provide feedback and recommendation on these. However, we remain concerned with a number of topics being considered for scaled advice, in particular Transition to Retirement, Centrelink and Retirement planning.

“Such areas are complex and in order to serve the client’s best interest, planners must take into account the client’s personal and family circumstances and financial arrangements,” Mr Rantall said. “By their very nature these issues cannot and should not be provided as a scaled advice option.”

Finally in support of equality within the financial advice profession, the FPA is pleased to see that our recommendation for the removal of the Class Order Relief for superannuation trustees is included in this consultation paper.

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