Scaled advice isn’t just for the banks, says Philippa Sheehan, who calls on licensees to support advisers in its implementation.
The recommendations of the recent Australian Securities and Investments Commission’s (ASIC) Consultation Paper 183: Giving information, general advice and scaled advice about limited-scope advice has done a great job of clearing up many of the grey areas surrounding scaled advice.
It spells out that scaled advice is not lesser advice and makes it clear that the rules apply equally to comprehensive and scaled advice, the only difference being that the level of inquiry needs to reflect the complexity of the advice being given.
These are all great steps forward, but there are a couple of areas where further clarification is needed if we are to continually improve the quality of financial advice for all Australians. The first is the question of when scaled advice becomes comprehensive advice, and the second is who should be giving scaled advice and how licensees can go about supporting their advisers in understanding and implementing it effectively.
Linking the scales
The first question, of when scaled becomes comprehensive advice, is important because it goes to the heart of providing quality financial advice. If advisers are asked to give a number of different pieces of scaled advice but are not able to see the full picture of a client’s circumstances, the outcome can be that the advice given may not be in the best interests of the client, as the adviser is not able to judge how the different pieces of advice given will link together.
As an industry, we need to understand how many times a client can ask for advice and on how many topics, before an adviser should deem the advice to be comprehensive and act accordingly.
Fact finding
The second question, which relates to the implementation of scaled advice, is a complex one. There has been some talk that scaled advice is only for the banks and that independent financial advisers will struggle to implement it successfully.
My view is that scaled advice can readily be a part of everyday practice for all financial advisers. All that is required is some education. By this I mean that licensees and their financial advisers need to work together to prepare the specific tools required to implement scaled advice.
The first step should be the development of a core fact-finding document. Once this document is developed, the next step is the development of appendices, which can be added to the core document in the event that a client requires advice on additional topics.
Scoped fact-finds can easily be adapted to many different client scenarios and in this way both the adviser and the client will have a clearer understanding of where they are going and what is required to get there.
Ultimately, even though advice may be scaled, it is so often not really about just one transaction. Licensees and advisers need to have the tools in place to ensure that they are getting the best outcomes for clients while meeting ASIC requirements and complying with the Corporations Act by acting in clients’ best interests at all times.
Philippa Sheehan is managing director of My Adviser.
