The Association of Financial Advisers (AFA) has congratulated the Minister for Financial Services and Superannuation, Bill Shorten, on taking an important step towards better protecting consumers by putting forward a proposal to enshrine the term ‘financial adviser’ in legislation.
Minister Shorten released draft legislation this morning which restricts the use of the terms ‘financial adviser’ and ‘financial planner’. The legislation will limit the use of these terms to people who have an Australian Financial Services Licence (AFSL) or who are authorised by someone who has an AFSL.
AFA CEO, Richard Klipin said enshrining the term financial adviser is a win for consumers and the professional advisers who serve them. It will help protect consumers from unlicensed advisers, who, under the new legislation, will be prohibited from using the term.
“This will go a long way towards protecting consumers from unlicensed operators who have until now been able to call themselves financial advisers,” Mr Klipin said. “Consumers will now know that the people they seek advice from are genuine financial advisers, who are licensed or authorised to provide financial product advice.”
AFA President, Michael Nowak, said the proposed legislation is a win for the industry. “It is a particularly good outcome for the financial advice industry,” he said. “Advisers can now use the term ‘financial adviser’, confident in the knowledge that consumers will understand that they are licensed or authorised to provide financial product advice.”
The AFA’s Back to Basics research released in 2010 demonstrated that while people who are in an advice relationship are better off financially; happier, more engaged with their finances and have a feeling of certainty and control over their financial future, only around two in 10 currently get advice.
“This may have something to do with the fact that consumers don’t know who to trust when it comes to financial advice,” Mr Nowak said. “Enshrining the term financial adviser will help resolve that issue.”
Mr Klipin also acknowledged the consultative approach the Government had taken.
“What the industry now has is a very practical solution which will help raise the perception of the financial advice profession and help restore consumer confidence in financial advisers,” he said. “We look forward to working with the Government to finalise this legislation and to see it passed by the parliament into law.”