The conflict of interests provision under the Future of Financial Advice (FoFA) reforms is a clear recognition by the regulator that consumers have no idea whether their financial adviser is independent or tied to a distribution channel.
It follows, therefore, that clients can’t be blamed for failing to recognise the differences between a glorified salesman pushing a particular product and a professional financial planner who is required to act in their best interest.
However, ASIC’s Peter Kell sees little reason for alarm from advisers or dealer groups over conflicted interests, which is inherently tied to the general spirit of the FoFA reforms.
“So many of the FoFA reforms are about insuring that conflicts of interest can either be removed or appropriately managed,” he said.
“When we are looking at the way in which licensees and advisers deal with conflicts of interest, the sort of management arrangements they have in place, we’ll be looking at the ways in which those arrangements deal with the best interest duty, with the client priority rules and also with the remuneration structures that are in place.
“And if you’ve got those well managed, you’re going to be fine.”
In the video below, ASIC Commissioner Kell, the Financial Planning Association’s Dante De Gori and managing director of Tupicoffs, Neil Kendall, discuss how practices can avoid or manage conflicts through disclosure.
Professional Planner and the Financial Planning Association of Australia (FPA) have produced a series of videos on “Bulletproof financial planning” – a financial planner’s guide to complying with the new FoFA rules, and how adhering to the FPA’s code of professional practice can help negotiate a potential minefield.
In part five we look at conflicts of interest: how these can be identified and then either removed or disclosed and practically managed.
To watch Bulletproof Financial Planning (Part 1) – Best Interests, click here.
To watch Bulletproof Financial Planning (Part 2) – Scaled Advice, click here.
To watch Bulletproof Financial Planning (Part 3) – Conflicted Remuneration, click here.
To watch Bulletproof Financial Planning (Part 4) – Opt In, click here.
