The enshrinement of the terms financial planner and financial adviser in law is one step closer after a Parliamentary Joint Committee (PJC) report recommended government proceed with legislation.
However, the opposition will neither support nor oppose the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, despite describing the changes as “rushed,” and “ad hoc”.
“The Coalition remains sceptical about this proposal though we will not oppose passage of the legislation,” states an amendment to the PJC report.
Central to opposition concerns is that the terms ‘financial planner’ and ‘financial adviser’ can legitimately be used to describe business activities quite different to those envisaged by the legislation. It also makes the point that accountants are highly respected professionals without having the term ‘accountant’ enshrined in legislation.
“While the provisions are drafted on the assumption that these terms are only used in association with personal financial advice, they can equally be used in association with wholesale or corporate financial advice,” it notes.
“For example, an investment bank providing advice to the board and management of a corporate may reasonably describe itself as that corporate’s ‘financial adviser’.”
Time is against us
The other factor now is time, with several sources indicating to Professional Planner that there may not be a long enough period for government to consider the PJC recommendations and proceed with the passage of the bill, unchanged or with amendments, before the last sitting week of parliament in late June.
For the moment, the committee recommends that the Australian Securities and Investments Commission consult with key stakeholders in the financial advice sector to implement a grace period to ensure that in the short-term, passive breaches of the new provisions will not be prosecuted.
“ASIC should engage with the financial advice sector to discuss the time that practitioners will need to ensure that signage is changed,” concluded the PJC report.
The committee also recommends that the regulator clearly sets out on its MoneySmart website the changes that the bill makes to inform consumers about what they can expect when they receive a service from a “financial planner” or a “financial adviser”.
The Financial Planning Association (FPA) cautiously welcomed the report but stressed there is a long way to go before enshrinement of the terms under law.
Dante De Gori (right), FPA general manager of policy and conduct, told Professional Planner that the recommendation was “a green light to proceed but we can’t get too carried away” and that “time is against us” when it comes to getting the legislation passed before June 27.
Welcome to enshrinement
In April 2011, the FPA called on the government to restrict the term “financial planner” under law for the protection of consumers. Minister Bill Shorten released legislation for enshrinement in November 2012 and in March this year, government introduced legislation for “financial planner/adviser”.
Under the Corporations Act 2001, there is presently no constraint on individuals calling themselves “financial planners” irrespective of their training, competence and even licensing.
“The FPA welcomes specific recommendations made by the report to ASIC pertaining to enshrinement of ‘financial planner/adviser’,” said FPA chief executive Mark Rantall in a statement.
“In order for any piece of legislation to be implemented, an entire profession and industry needs to be behind it. The FPA welcomes the recommendation by the report to have ASIC, through MoneySmart, promote and communicate to consumers the benefits of enshrining the terms financial planner and financial adviser.
“We also support the recommendation to require ASIC to consult with industry about how to deal with short-term breaches and determine what time is needed to allow inappropriate usage of the term financial planner and adviser to be removed from all marketing material.”
