Changes to the second tranch of the Future of Financial Advice (FOFA) reform will make financial advisers more accountable, according to the managing director of Gold Seal Legal.
"I think [there are changes in the new reform] because they think they see a large gap in between what advisers think they do and what they actually do," Claire Wivell-Plater told delegates at last week's FPA's 2011 National Conference in Brisbane.
"The changes hold advisers more accountable and will force the industry to change."
The key change will be clarity between the client and the adviser where the adviser will need to advise if other advice is more suitable and introduction of a letter of engagement.
"I think it's time to say it's strategy first, product second," Wivell-Plater said.
Advisers should assess whether the financial products are needed to meet the client's objectives.
"This is new, before it was all about the product," she said.
She explained that going forward, advisers only need to advice on what they are asked for by the client. This will highlight the importance of scaled advice.
The agreement between what clients want and what adviser will provide is currently missing from the adviser/client process.
There will be a move towards more clarity with letters of engagement, where the client signs and agreement for the advice they are getting with costs explained.
"Letters of engagement will also help for opt-in," Wivell-Plater said.
"Some propose it is an effective and flexible way to manage client relationships."
