The Industry Super Network (ISN) has applauded the regulator for expeditiously releasing final guidance over the best interests duty and scaled advice aspects of the government’s Future of Financial Advice (FOFA) reforms.
However, the group also expressed disappointment that the ban on conflicted remuneration was not stronger.
ISN strategy manager Robbie Campo noted the Australian Securities and Investments Commission’s (ASIC’s) affirmation that when assessing if an adviser had satisfied best interests obligations, the regulator would assess “whether a reasonable advice provider would believe the client is likely to be in a better position if the client follows the advice.”
“We would commend this as a sensible principle, which is completely in line with what consumers would expect from an interaction with an adviser,” she said.
“This expectation is judged according to the circumstances which existed at the time the advice was provided and can take account of benefits other than financial benefits.”
ISN commended the focus on an adviser’s responsibility to properly scope advice, to clearly articulate the strategy of the advice, and managing conflicts of interest.
The group also welcomed guidance on the delivery of scaled advice, particularly the requirement that new scaled advice providers must also meet the best interests duty.
“Rolling out the best interests duty and making more limited forms of advice available are not mutually exclusive objectives. It would be counterproductive were greater access to advice achieved by lowering regulatory requirements and creating a subclass of lower quality advice,” Ms Campo said.
“ASIC’s guidance and worked examples send important signals to the industry about how scaled advice can be delivered and what ASIC’s expectations are.”
But ISN noted ASIC would not be proceeding with proposed thresholds on performance benefits relating to sales volumes as part of its upcoming guidance on conflicted remuneration, due to industry opposition.
“ISN is very disappointed that institutional product providers are still wedded to paying volume-based payments to their advisers, despite public rhetoric about moving away from conflicted remuneration,” Ms Campo said.
“The reason institutions want to pay incentive payments to their planners is clear – because it is effective in getting their product sold. This is likely to be counterproductive in the long run, as the planning industry evolves into a genuine profession and Australians seek advice in their best interests, rather than a sales pitch.”
