The best interest duty in its current form is unworkable in practice and will give rise to significant unintended consequences if not amended.
This is the view of the Financial Services Council (FSC), which has responded cautiously to the financial advice reforms tabled in Parliament last week.
John Brogden, CEO of the FSC, said the best interest duty announced today would leave the industry grappling with uncertainty and would increase the cost of advice.
“This duty undermines a core objective of the FoFA reforms – to increase the availability and accessibility of advice,” Brogden says.
“The Financial Services Council supports a best interest duty; however, the legislation announced today will create unprecedented uncertainty for consumers and advisers.
“Our legal advice tells us this legislation would be very difficult to work with from the point of view of understanding what it means and how it would apply in practice.”
Brogden says the best interest duty is “the foundation of the entire reform package, and without a clear and objective measure to test whether an adviser has acted in the best interest of their client, advisers will be exposed to significant risk and the cost of advice will go up”.
“To make matters worse, no reputable financial services provider will be able to offer scalable advice under this particular duty – this will be to the detriment of millions of Australians,” he says.
