The changes to scaled advice proposed by the Government could result in unintended consequences, the Financial Planning Association has warned.
In its submission to the proposed Future of Financial Advice (FoFA) amendments, the FPA has called for a tightening of the rules surrounding scaled advice. The Association said it believed the changes to the best interests duty intended to make it easier for advisers to limit the scope of their advice could, in fact, put consumers at risk.
According to the FPA, additional wording needs to be provided which sets out that an adviser and a client must agree upfront on the scope of advice. Further, the adviser should then only be able to exclude those inquiries which are not reasonably relevant to the subject matter of the advice.
In its submission, the FPA said if these, or similar, measures were not taken, there was a very real concern that: ‘Business practices could emerge where financial advisers who are not bound by professional standards market themselves as financial planners but do little more than gather the legal minimum of information to make product recommendations.’
Many of the draft FoFA changes are positive, however they also require careful management
Dante De Gori, General Manager of Policy and Conduct at the FPA, said: “We are broadly supportive of the proposed improvements to FoFA; however, we have identified some areas for improvement in the amendments and have submitted suggested policy enhancement in those areas.
“The overall aim of the FPA’s submission is to provide workable alternatives that will ensure the final legislation will assist financial planners in providing high quality, professional financial advice for the greater good of the Australian public.
“A good example is the pragmatic measures we have outlined to remove layers of red tape and provide greater certainty for scaled advice. Many of the draft FoFA changes are positive, however they also require careful management in order to avoid any unnecessary risk or detriment to consumers,” Mr De Gori said.
The Association of Financial Advisers has also provided a submission on the proposed amendments. Click here to read the AFA’s recommendations.
