The measure, which is part of The Corporations Amendment (Simple Corporate Bonds and Other Measures), was the subject of a PJC inquiry that delivered its report on Wednesday.
As well as recommending that the measure become law, the PJC report also found that the Australian Securities and Investments Commission (ASIC) should put in place a grace period “to ensure that in the short term, passive breaches of the new provisions will not be prosecuted”.
The regulator should engage with key stakeholders in the financial advice sector to “discuss the time that practitioners will need to ensure that signage is changed”, according to the report.
The PJC also recommended that ASIC clearly set out information on its MoneySmart website to inform consumers about what to expect when they engage the services of a ‘financial planner’ or a ‘financial adviser’.
The PJC received 14 submissions about the enshrinement of the terms, with support from representative advice bodies, the Australian Institute of Superannuation Trustees, the Industry Super Network and the Stockbrokers’ Association, among others.
However, the measure drew opposition from Robert Brown, fellow of the Institute of Chartered Accountants, who argued that the Future of Financial Advice reforms have failed to eliminate conflicted remuneration from financial advice – naming percentage-based asset fees, commissions based on individual life insurance policies and trailing commissions on existing arrangements in particular.
“Consumers of financial services are likely to incorrectly conclude that by consulting what amounts to a 'government-endorsed' licensed 'financial planner' or 'financial adviser' they will be dealing with a professional person who can be relied upon to act in their interests, without the improper influence of conflicted remuneration,” said Mr Brown.
While the remaining submissions were broadly supportive of the proposed changes, there was some concern about whether the term ‘financial adviser’ should be enshrined.
In a joint submission, CPA Australia and Institute of Chartered Accountants supported enshrining ‘financial planner’ but argued that restricting the term ‘financial adviser’ is unnecessary and would be overly restrictive.
“The term 'financial adviser' is recognised and used in broader terms by professionals other than those licensed to provide financial product advice to retail clients,” said the joint submission.
Speaking before the committee, Financial Planning Association chief executive Mark Rantall also made a distinction between the terms.
“We believe financial planners are more involved in a holistic approach to financial advice. We think financial advisers are more product advisers,” he said.
But for Association of Financial Advisers chief executive Brad Fox, the terms are synonymous – and he disagreed with assertions that restricting the term ‘financial adviser’ would be detrimental.
