The corporate regulator released an information sheet on providing limited advice this week that gave little new information, but serves as an important reaffirmation of the compliance requirements in an area advisers and licensees have become increasingly reluctant to delve.
The information sheet, released Wednesday, covers the elements of scaled or limited advice provision advisers would expect from the regulator, including the need to use professional judgement when identifying subject matter and scope, being clear about the scope of service being provided and taking active steps to inquire about a client’s relevent circumstances.
In this respect, the sheet is a simple reflection of the two regulatory guides it summaries; RG 175 (Licensing: Financial product advisers—Conduct and disclosure) and RG 244 (Giving information, general advice and scaled advice).
If there is a contemporary bent to the information sheet it is that the guardrails presented by FASEA’s Code of Ethics are included and referred to in the context of limited advice. New examples are also given addressing out-of-scope advice topics, as well as a table detailing “tips for good record keeping”.
In essence, the sheet is simply a helpful consolidation of compliance parameters that are already well known. Be sure to identify the clients reasons for seeking advcie by asking open-ended questions, ASIC says, and put your client first by declining to give advice if you can’t act in their best interests.
What the sheet does, however, is re-affirm to the advice community that scaled advice is very much a reasonable proposition and a viable part of the advice landscape, after the area was highlighted as a topic of concern for advisers in ASIC’s consultation paper 332 (Promoting access to affordable advice for consumers).
Limited advice is too costly, advisers told ASIC. The interplay with the Code of Ethics is too vague and licensees are spooked by the regulatory uncertainty.
Against the backdrop of these concerns, it’s being made clear by ASIC that episodic or scaled advice under a fee-for-service arrangement is important to consumers who might not see value in full scale, holistic advice that costs an ongoing percentage of their investible assets.
“ASIC recognises that many consumers prefer to seek limited and specific advice rather than comprehensive advice,” commented ASIC commissioner Danielle Press. “We also understand that industry faces some barriers to providing limited advice, including a lack of clarity about the regulatory requirements.
“We expect this guidance will provide regulatory certainty to industry and help reduce compliance costs,” Press continued. “It will assist financial advisers in their efforts to make these forms of advice more available to consumers and assist them in delivering quality advice in a timely, affordable, and compliant manner.”
With this information sheet, ASIC has tried to re-paint what many see as the faded boundary lines of a football field. Nothing substantially new, but a reaffirmation of the relevant parameters to give advisers and licensees the confidence to use the full length of the pitch.
I’ve just read (info 267). It clarifies nothing as far as I’am concerned. I doubt that it will do anything to make advice more accessible or affordable.
I defer to Albert Einstein:
“We cannot solve our problems with the same thinking we used when we created them.”
Repainting the lines on the pitch is a complete waste of time when the pitch is half underwater and in the wrong place.
ASIC’s compliance approach of whacking advisers for technical breaches rather than actual client harm ensures that most of us will waste our time at an increased cost to all, writing full Statements of Advice.
Proper regulation of a professional industry is the answer, not this paint by the numbers rubbish and if you cross the line your business is at risk.
Well said Anthony.
Maybe the (much maligned) concept in Industrial Relations of ‘better off overall test’ would work better in financial services? Some much licensee remediation is just money for jam for clients. They haven’t complained, they are happy with the advice but, hey they didn’t get a document called a FDS so they get all the fees back. This is regardless of the fee disclosure in several places throughout the year.
Technical breaches are exactly as you said ‘paint by numbers’ and there isn’t the concept of what harm has resulted? Even parts of the Tax Act provides regulator discretion to use common sense and decide on the actual intent of the behaviour etc.
When you see ‘Finfluences’ running for cover after ASIC got on the airwaves you have to think access to advice is a pipe dream.
Unfortunately, this doesn’t actually help much as there is still the FASEA code to apply to. Also, your Licensee is the one who will dictate what your advice must contain.