New ASIC Advice Unit Proposed


ASIC should consider establishing an Advice Unit that could provide rulings to licensees and advisers to clarify the legislation and regulations, similar to the ATO providing public and/or private rulings to the accounting industry, according to The Advisers Association.

In its submission to ASIC, which is consulting on promoting access to affordable advice for consumers, the association says this unit would be in addition to reviewing the regulatory guidelines.

It says the unit would:

  • Help to clarify expectations related to advice legislation and regulatory requirements that are subjective and increasingly complex
  • Provide licensees and advisers with a mechanism to determine if their interpretation is correct, for example, the Best Interests Duty is couched in terms of whether your peers would consider the advice reasonable, yet there is no peer group or other mechanism to consider this
  • Assist with the development of clear, concise and effective policies, processes, tools and technology to deliver advice to clients and everyday Australians

“… unfortunately, understanding how to provide good-quality limited advice and being able to do so are different…”

In its consultation notes, ASIC asks whether prospective submitters have read RG 244 and whether it helped them to understand how to provide good quality limited advice? The association says it has, “… unfortunately, understanding how to provide good-quality limited advice and being able to do so are different”.

It says the cost of actually providing this advice is “…just too high due to the need to research and document product comparisons, clarify SMART goals, scope the advice, establish BID, meet FASEA code requirements, prepare the SOA, provide the advice to the client, ensure the client understands the advice being provided and what is not being provided, make changes to the advice based on client feedback, etc”.

“This means that the time involved and the cost of providing limited advice is almost the same as providing comprehensive advice.

“In addition, the concerns of not meeting FASEA and BID obligations (FASEA Standards 5 and 6) is compounded by a genuine fear of some future look-back program and/or AFCA complaint resulting in a broader review of the appropriateness of that advice with a potential binding finding against the adviser/licensee.

Impediments to the Advice Industry Providing Good-Quality Limited Advice

In the part of the consultation asking about the impediments to the advice industry providing good-quality limited advice and how the industry and ASIC should address these impediments, the association says that the changes implemented over the last 20 years, have not addressed their stated intent of making good-quality advice available to everyday Australians at a reasonable cost.

“In fact, the opposite has occurred with advice becoming more expensive and more complex to deliver due to ‘black letter’ legislation, multiple/over regulation and risk adverse licensees resulting in the detriment of the consumer experience and outcomes.”

It says that to address the root causes outlined “…we need to collectively lobby the Government to review the financial services industry system, including:

  • Broadening Section 7 of the Corps Act to include all types of financial advice including strategic advice
  • To separate product information from advice
  • To reduce overly long advice documents created to protect the licensee and adviser, that are ineffective anyway.