The details of an ASIC code will hold the key to Australia's financial advisory sector having a better understanding of its opt-in requirements under the government's advice reforms.
Last week, the industry was handed a series of concessions regarding the opt-in clause, with Financial Services and Superannuation Minister Bill Shorten watering down the provision under the Future of Financial Advice (FOFA) reforms.
Under the amendments, opt-in, which requires planners to re-sign contracts with their clients on a regular basis, will not be required where a planner is a member of a professional body.
It will also not be required where the advice body has an approved professional code of conduct, and where ASIC has provided a class order excluding them from the requirement.
While many within the advice sector have declared the FOFA amendments a 'win' for the industry, a greater level of complexity could reveal itself in the form of the ASIC code.
"What we do not know is what will be in any ASIC-approved code, for example. Obviously the FPA is saying they would be seeking approval and the AFA (Association of Financial Advisers) have also said they are also working with ASIC to get a code approved," Minter Ellison partner Richard Batten told InvestorDaily.
"The key is of course what are those codes going to require and could they, for example, could they require an opt-in mechanism."
While Batten was quick to state he did not believe the code would include an opt-in mechanism, he said the question that needed to be asked was whether ASIC's code could mean a new layer of regulation for the industry.
"The greatest difficulty here is everybody is shadowboxing a little bit. There's no public statement as to what exactly needs to be in that code," he said.
"A good code shouldn't necessarily lead to higher levels of tick-box compliance. It should lead to higher levels of professionalism, higher standards of ethics. In my mind that is a complex matrix to strive towards.
"Any approved code is not going to be potentially the last word in relation to getting to that outcome."
Henry Davis York partner Liz Gray said the opt-in amendments were a win for the industry.
"Overall I do think that is a win for both the financial advice industry and the consumers because the code, you would expect, would require the good types of behaviours that you would want to see from advisers," Gray said.
"But, of course, it will require them [advisers] to meet with the standards of the codes that are set. The codes will be set by the professional bodies and will need to be approved by ASIC, and I would expect there to be a high standard of behaviour required to satisfy the codes and therefore be able to rely on the relief."
An ASIC spokesperson said the regulator did not have any comment at this stage, only to say "we welcome the development and will work with industry to implement [it]".
Paragem Holdings managing director Ian Knox said opt-in, at face value, had been "deferred and watered down, hence it feels like a win for the common-sense aspect of the debate".
"The heat has been taken out of the debate because it is not compulsory effective 1st July 2012," Knox said.
"As yet no-one is clear on what will be required and what hurdles are needed to be met before determining whether the deferral has any relevance.
"Most small practice advisers are undeterred by this and it is still more complex to manage for older-style practices with thousands of clients that aren't seen every year."
Last week, the FPA and AFA said they were working closely with ASIC regarding the codes.
