The financial advice industry has welcomed enshrinement of the terms “financial planner” and “financial adviser” after the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013 passed through the House of Representatives last night.
The bill must still be approved by the Senate but this now seems inevitable given the coalition’s decision not to oppose its passage. The Senate next sits from June 17 to June 27.
This potentially gives property spruikers and other unlicensed operators just a few days to stop calling themselves financial advisers before the amendment becomes law on July 1.
However, enforcement may initially be a low priority for the Australian Securities and Investments Commission (ASIC), which will presumably have its hands full monitoring the enactment of the Future of Financial Advice (FoFA) reforms from the same start date.
The government has consistently argued that restricting the use of terms financial planner and financial adviser will enable the corporate regulator to take specific action against persons who hold themselves out to be either of those without being allowed to do so under a licence.
Minister Bill Shorten said the amendments enshrining the terms would enhance consumer protection by making it easier for Australian consumers to identify genuine providers of financial product advice.
“The amendments will make it an offence for a person to hold themselves out to be an authorised financial adviser or financial planner when they are not, or to use terms of similar importance, thereby helping to protect consumers against property spruikers and other unlicensed operators,” he said.
Opposition’s watching brief
The arrival of the bill before parliament last night caught many in the industry by surprise as it was not expected to be debated before today.
Liberal Tony Smith, federal member for Casey, outlined the coalition’s reservations but said it would not be opposing the passage of the bill.
“The change to enshrine the definition of these terms in the legislation is unlikely to make much of a positive difference from the current position,” he said.
“The law already requires anyone providing financial advice to hold an appropriate Australian Financial Services Licence through ASIC. To provide advice without such an AFSL is already an offence.”
Smith pointed out that other terms in the finance industry, such as accountant, are not enshrined.
“Clearly the dividing line in policy terms between what ought to be enshrined and what ought not to be is difficult to agree upon even within the industry,” he said.
“The legislation should not be the first step towards more red tape and complexity, with costs of business compliance being passed on to consumers for very little protection. I point that out because some in the industry are foreshadowing future changes.
“The coalition will keep a watching brief on the implementation of this legislation and any flow-on consequences it may have, particularly for unnecessary regulatory burdens with minimal policy outcomes.”
Red letter day for advice
Dante De Gori, general manager of policy and standards at the Financial Planning Association of Australia (FPA) told Professional Planner it was a “historic day” for all Australians.
“The passing of the bill is a significant step in strengthening consumer protection and increasing trust in the profession,” he said.
“The FPA has led the pathway to professionalism in financial planning and holding our profession accountable to higher standards will benefit those in the profession, those looking to join the profession and the clients they serve. It has been a long journey but we are delighted that our call has been heard and this bill has been passed to the benefit of all Australians.”
The Association of Financial Advisers (AFA) also welcomed the enshrinement of both terms, reiterating its view that the terms have the same meaning and are used interchangeably within the industry.
“This piece of legislation has been reviewed by the Parliamentary Joint Committee on Corporations and Financial Services and they supported it,” said AFA chief executive Brad Fox.
“The AFA continues to believe that the legislation is good for both consumers of financial advice services and for the financial advisers who provide those services.”
Pressure on licensees, ASIC
Tim Nethercote, a partner at commercial and financial services lawyers Holley Nethercote, said he hopes that enshrining the terms in the Corporations Act will help consumers be able to find providers of quality financial advice.
“Having said that, the provision of high quality advice will still depend on licensees having in place appropriate measures such as guidance on the best interests obligations, and robust monitoring and supervision of their representatives,” he said.
“We expect that the reforms will also help ASIC to locate and take action against unlicensed financial ‘advisers’ and also restrict the use of certain descriptive terms which might mislead consumers.”
AMP’s director of advice and client solutions, Steve Helmich, called the bill’s passage “a positive move that will help establish financial planning as a profession and ensure that consumers can clearly understand the difference in engaging with a financial planner as opposed to others who may provide some form of advice”.
Mark Spiers, general manager of advice at BT Financial Group, said he welcomed the news.
“It is a great step towards better consumer outcomes and this should always be our ultimate goal. However, no single regulation alone is going to make financial planning a profession,” he said.
“A profession will be born out of the interplay between regulation and self-regulation and it is up to industry participants to aspire to do more than simply meet minimum benchmarks.
“Putting clients at the centre of everything we do must therefore be a guiding principle in the industry’s quest for professionalism.”
