The best interest obligation contained in the federal government's draft financial advice reform legislation only goes part of the way to forming an appropriate framework for Australian financial advisers to follow, according to a number of advice chiefs.
FPA chief executive Mark Rantall said what had been delivered on the best interest obligation did not work in isolation.
"There's no silver bullet in any of this. We actually pushed for a best interest test rather than a straight fiduciary duty because of the licensee complications," Rantall said.
"What we're looking at is in line with our best interest test and that is putting the clients' interests ahead of your own as a financial planner, so all of our members already sign up to that principle. It's a positive thing if the rest of the advisory community lines in behind that as well.
"But that isolation, without a professional framework, probably only goes part of the way and it's more about the behaviour that goes with that."
He said the FPA pushed for licensees and advisers to be "captured by the same responsibility".
"That has been acknowledged in some way. It has gone part of the way to giving relief to the adviser where there is a conflict, however, I want to see the detail around that and the strength of it," he said.
Association of Financial Advisers (AFA) chief executive Richard Klipin said the legislation had "failed consumers".
"The role of the AFA is to lead its members, in terms of change, to debate vigorously those bits of policy that are not in the best interest of the consumer," Klipin said.
Financial Services Council chief executive John Brogden said the association had always been in favour of a best interest duty for financial advisers.
"Our initial reaction to the draft legislation is that while the best interest duty appears to be process-oriented, there remain a number of areas where the industry will be seeking further clarification to ensure it provides certainty to consumers and financial advisers," Brogden said.
Under the first tranche of the FOFA draft legislation, announced yesterday, a best interests obligation for financial advisers requires them to act in the best interests of their clients and to place the interests of their clients ahead of their own when providing personal advice to retail clients.
Specifically, the legislation intends to push for, among other things, a statutory obligation for individuals who provide personal advice to act in the best interests of clients and a statutory obligation for individuals who provide personal advice to give priority to the interests of the client in the event of a conflict of interest.
