The Association of Financial Advisers has highlighted what it says are “…the many problems that the financial advice profession has had in understanding what is required to comply with the Best Interests Duty obligation.”
The genesis for making this statement now relates to a recent submission the Association made to Treasury around a recommendation stemming from the Banking Royal Commission to introduce a Best Interests Duty for mortgage brokers.
In a weekly update to members, the AFA’s GM Policy and Professionalism, Phil Anderson, noted the current proposal by the Treasury to implement a Best Interests Duty on mortgage brokers should be implemented without any safe harbour provisions and without any detailed guidance by 1 July 2020:
“This consultation also includes other measures on banning a range of conflicted remuneration for mortgage brokers, which is also scheduled to start on 1 July 2020. Any suggestion that mortgage brokers escaped the impact of the Royal Commission is misguided,” said Anderson.
In its submission, Anderson says the Association has highlighted the challenges that the financial advice profession has faced with the introduction of a Best Interests Duty, including the history of ASIC reports on advice quality that have demonstrated issues with compliance with the Best Interests Duty. The submission detailed these reports as including:
- ASIC Report 413 on life insurance advice that included a 37% fail rate
- ASIC report 562 on superannuation advice in vertically integrated groups with a 75% failure rate
- ASIC Report 575 on SMSF advice with a 91% failure rate
…something has gone seriously wrong with the implementation of the Best Interests Duty for financial advisers
Anderson said the question of what constitutes Best Interests Duty is further compounded by ASIC Report 515 project (Best Interests Duty Uplift) which he said is driving substantial change within the institutionally owned licensees and having a huge impact upon many advice practices:
“All of these outcomes highlight that something has gone seriously wrong with the implementation of the Best Interests Duty for financial advisers,” said Anderson.
“Our primary point is that if the introduction of the Best Interests Duty for financial advisers has been so problematic over the last six years, then similar issues could be expected in the mortgage broker space, particularly where it is being done without a safe harbour and in such an unreasonable timeframe, “ said Anderson, who concluded by warning that neither the Government nor mortgage brokers should underestimate the difficulties this will generate.
The beginning of the end for mortgage brokers, they only need to look at the current state of the Financial Planning Industry to see their future under a best interest duty.
A convoluted semantic debate which achieves nothing but creating a compliance industry which raises costs for consumers and destroys Australian businesses. Socialism at its worst.
What’s this got to do with Socialism. Government conspiring with industry bodies against small business and workers has another name.
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