The Government's draft of upcoming financial reforms won't require advisers to bear full legal fiduciary responsibility towards their clients, a leading academic has told SPAA conference delegates.
UNSW Faculty of Law professor Justin O'Brien, speaking at the ASIC summer school program, said the Future of Financial Advice (FoFA) reforms will instead carry a "best interest" obligation.
"What duty is actually is going to emerge from this process will not be coshed in fiduciary terms," said Prof O'Brien. "It will be a specific statutory best interest which will be highly specified in terms of what you can do and what you should do."
The draft of FoFA legislation could cause the Government problems, said Prof O'Brien, as the general opinion of the wider community is that more rigorous controls on financial advisers are needed.
He warned the financial planning sector not to view the situation as having a dodged bullet, but rather an opportunity to demonstrate that the Government's confidence in the industry is warranted. "It means professional bodies must come to the fore now with the development of professional standards that far exceed the minimum standard set by RG146."
Monash University professor of finance Deborah Ralston pointed out that by general concensus the focus of regulation is moving away from a balance between efficiency and consumer protection, to a heavy emphasis on consumer protection. "This is an issue for regulators and professional bodies and professionals and corporates and dealer firms and educational institutions and individuals... to have a very strong ethical background," she said.
"In the banking sector following the GFC [global financial crisis], there is a lot of talk about creating a risk culture and a good credit-culture, and we really need to be talking about a good advice-culture."
