December 8, 2017
ASIC has confirmed that it will not regard remuneration that provides an educational benefit to advisers as conflicted but has cast doubt on the sponsorship of conferences.
In the updated version of Regulatory Guide 246: Conflicted and other banned remuneration, ASIC stated that non-monetary benefits would not be considered as conflicted remuneration if they had a genuine educational or training purpose that was relevant to the carrying on of a financial services business or giving information on life risk insurance products.
ASIC stated “…the benefit must be for the provision of an education or training course to an AFS licensee or its representative; or have the dominant purpose of education or training”.
In contrast, ASIC stated that sponsorship of conferences and soft dollar benefits would be considered as conflicted remuneration if they “…could reasonably be expected to influence the choice of financial products recommended or advice given”.
“…the benefit must be for the provision of an education or training course…or have the dominant purpose of education or training”
RG 246 stated the level of influence needed to be viewed as to “…what a reasonable person would consider to be the purpose of the person soliciting or giving the benefit” and the definition of conflicted remuneration under the Corporations Act was “…objective and it does not matter if the benefits actually do influence the advice given by the advisers”.
Conditions have been placed around how much time must be spent in actual training and education with RG 246 stating “…education and training activities for the course must take up at least the lesser of six hours a day or 75 per cent of the time spent on the course”.
ASIC also stated that participants on course, or their licensee, must pay for travel and accommodation relating to the course, and events and functions held in conjunction with the course.
Licensees will also be required to keep records of education and training benefits received by its adviser representatives that relate to the carrying on of a financial services business or where a benefit relates to information on, or dealing in, a life risk insurance product.
The new version of RG 246 also includes guidance on the remuneration reforms under the Life Insurance Framework with working examples in the direct and retail insurance sectors.
The guide was last updated in 2013 and the conflicted and banned remuneration provisions are part of the Future of Financial Advice reforms and apply to commissions, volume-based payments, so-called ‘soft dollar benefits’ and volume-based shelf space fees.