Industry bodies have welcomed new government legislation creating limited Australian Financial Services Licences (AFSL) and restricting the term ‘financial planner’ in law.
The Financial Planning Association (FPA) first called on the government to legally restrict the term ‘Financial Planner’ in April 2011 and has approved new draft legislation for restoring professionalism in the industry.
“This is a fundamental public confidence issue. Only one in five Australians currently get financial advice and some of this is due to consumers not knowing who to trust,” FPA chief executive Mark Rantall said.
“Consumers deserve the right to differentiate between a qualified, professional financial planner and anyone who happens to hang out a shingle calling themselves a financial planner.”
The Association of Financial Advisers (AFA) has also approved the new measures as a win for the financial services industry.
The draft regulation will not only protect consumers from unlicensed operators, but consumers can be confident they are seeking genuine financial product advice.
“It is a particularly good outcome for the financial advice industry,” AFA president, Michael Nowak said.
“Advisers can now use the term ‘financial adviser’, confident in the knowledge consumers will understand they are licensed or authorised to provide financial product advice.”
The draft regulations have been announced as part of the Future of Financial Advice (FOFA) reforms.
Under the new reforms, the legal definition of ‘financial planner’ will be restricted to only include those who hold an AFSL or who are authorised by someone who holds an AFSL.
Currently, under the Corporations Act 2001, there is no constraint on individuals calling themselves financial planners, irrespective of their training, competence, and licensing.
But these latest government measures will provide safeguards preventing ‘product spruikers’ telling consumers they are qualified financial planners or advisers when they are not.
In another change to the industry, draft legislation will create a new AFSL to replace the current accountant’s exemption in FOFA, which see up to 10,000 accountants become licensed to provide a broader range of financial advice.
“This new licence means licensed practitioners will advise on a wide range of alternatives, rather than limiting their advice to the establishment of a self-managed super fund (SMSF),” minister for financial services and superannuation Bill Shorten said.
“By giving financial services practitioners the opportunity to expand their businesses, consumers can expect greater competition in the market and therefore more competitive prices.”
The draft regulation gives effect to all aspects of the reform announced by Mr Shorten on June 23.
In addition to providing advices of SMSFs, licence holders will now be able to give ‘class of product advice’ on basic deposits products, general and life insurance, securities and simple managed investment schemes.
The new regulations will also streamline experience requirements for accounts that hold professional practising certificates.
Submissions for both draft regulation papers close 21 December 2012.
