The Association of Superannuation Funds of Australia (ASFA) has begun testing scaled advice scenarios to determine whether it can operate within the federal government’s proposed best interests duty.
The peak superannuation body said it was testing scenarios following feedback from members.
“We are currently testing scenarios as to whether scaled advice will be possible with the best interests duty as currently drafted,” ASFA said in a supplementary submission to the inquiry into the Corporations Amendment (Future of Financial Advice (FOFA)) Bill 2001 and Corporations Amendment (Further FOFA Measures) Bill 2011.
“If this testing determines that [the best interests duty] impedes the provision of scaled advice, then it is likely that we would submit that the Further Measures Bill should be amended.”
It said given the “asymmetry of knowledge” between the adviser and client, a balance would need to be struck between facilitating scaled advice and protecting the interests of the clients.
“At this stage it appears as though the solution may be to permit the adviser and the client jointly to determine the scope of the advice,” it said.
“Any such determination of scope could only be with respect to the nature of the advice to be given and could not, for example, be an agreement with respect to the products to be advised upon, other than in the circumstance where intra-fund advice was being given.”
In terms of scaled advice, it said some of its members expressed concern regarding how an adviser should act in circumstances where it appeared there was a conflict between the scaled subject matter of the advice that had been sought, on a single issue, and the scope indicated by the client’s financial situation and needs.
“It has been suggested that where a client has sought advice on a specific matter and the adviser becomes aware of some aspect of the client’s financial circumstances or needs, that broadens the scope. In the absence of the ability to agree scope with the client, the subject matter must therefore become broader,” it said.
“This may be significantly wider than the client wants or for which the client is prepared to pay.”
It said such an outcome was the case where single issue advice was being sought from a superannuation fund where a member contacted the fund for advice with respect to one or more specific aspects of their superannuation.
“In this circumstance the member does not have the same relationship with the adviser as a client who has sought holistic advice from an adviser,” it said.
It said it intended to provide further information regarding its testing to the Parliamentary Joint Committee later this month.
