Brad Fox – CEO – AFA
The Association of Financial Advisers (AFA) welcomes the release of ASIC’s Regulatory Guidance on Codes of Conduct and the Opt-in Exemption.
“The guidance now allows the financial advice industry to get on with the business of planning out how to leverage this exemption in a manner that is both good for consumers and effective for advisers,” said AFA CEO Brad Fox. “This needs to be considered very carefully to ensure that the end outcome is beneficial for all stakeholders and can be delivered cost-effectively.”
The AFA has identified that there is still much to be considered with respect to the Opt-in Exemption and recommends that the industry take the time to consider this carefully.
“We are pleased that ASIC has provided further clarity on how an Authorised Representative may meet their legal obligations through obviating the need for Opt-in,” Mr Fox said. “Given that the Opt-in obligation is still more than two years away from applying to clients, this clarity means that advisers and licensees can focus their attention on the far more pressing issues of compliance with Fee Disclosure Statements and Conflicted Remuneration, enabling them to take the time to consider fully how they wish to be bound by a Code of Conduct and through which professional association.”
Mr Fox said the AFA is strongly supportive of codes of conduct and recognizes their importance in driving ever-increasing levels of professionalism within the financial advice industry.
“Codes are a cornerstone to building consumer trust and driving greater market reach,” he said. “But the Opt-in debate has unfortunately painted codes of conduct in a different context – as a means to avoid the law. There is an inherent risk in that approach – it may mean a Code can potentially impose an Association’s preferred business model onto advisers. The AFA believes Codes should not determine business models. This is a big issue and needs to be handled carefully.”
The AFA identified that the issues that still need to be addressed in relation to Codes include:
- Whether obviating the need for opt-in requirements will apply to existing clients as well as new clients. The legislation only applies to new clients
- How the situation will be addressed, if an adviser belongs to multiple codes
- The mechanism under which a professional association obtains access to information on potential code breaches from licensees, EDRs and ASIC
- The means by which members can choose to comply with the legislation, rather than a code, if this is their preference
- How an ASIC approved code can be developed and maintained with a cost structure that will make it financially attractive for advisers to elect to take up the code based exemption.
“For all these reasons, the AFA is giving active consideration to a limited code, which relates only to Opt-in. This limited code would be subject to ASIC approval,” Mr Fox said. “Limited codes do not prevent the existence of other strong, robust, comprehensive codes that do not require ASIC approval.”
Mr Fox said the AFA has already conducted extensive work on redeveloping the AFA Principles of Practice, which had been on hold since late last year awaiting the regulatory guidance.
“We will now move forward with this and provide further thought leadership to advisers and planners on a practical code of conduct that can shape behaviour and build greater consumer trust in the financial advice industry,” he said.
“The AFA looks forward to working further with ASIC and key industry stakeholders as key issues relating to codes are addressed.”