The law should be changed to focus the AFSL system on the regulation of financial products and remove the requirement to cover the provision of financial advice, according to the Financial Planning Association.
It is one of five recommendations the FPA has lifted from its ‘Affordable Advice, Sustainable Profession’ policy platform and added to its submission on the Australian Law Reform Commission’s review of financial services regulation.
Additionally, the FPA proposes that the law should be changed to separate the regulation of financial products from the regulation of financial advice.
The FPA recommended clarity on the application of the terms ‘general advice’, ‘strategy information’ and ‘product information’ in the ALRC’s first interim report, which focussed on definitions used in the Act.
It also wanted a review of the terms ‘financial adviser’ and ‘financial planner’, as well as ‘financial coach’, ‘financial mentor’ and ‘financial guru’ to determine if restrictions on the use of those terms are effectively protecting consumers from unqualified financial advice.
Less is more
The inquiry into the Corporations Act was part of the Hayne royal commission and sought to simplify the laws that regulate financial services in Australia.
The ALRC released its first interim report on 30 November, 2021, and the 664 page report rivalled the complexity of the law itself.
The next interim report will be due by 30 September, 2022, with the final report due 14 months later on 30 November, 2023.
Before the final report is tabled, there will be another interim report due on 25 August, 2023 that focuses specifically on Chapter 7 of the Corporations Act which deals with financial services and markets.
Sarah Abood, FPA CEO, said the financial planning profession doesn’t need more regulation, it needs better regulation.
“Financial planners are required to interpret a never-ending list of contradictory requirements placed on them,” Abood said.
“To ensure compliance, planners are required to comply with four laws regulated by eight regulators with additional oversight from Australian financial services licensees and professional associations and additional consumer complaint mechanisms through two ombudsman services and the courts.”
Abood said this all came at the cost of providing clear, concise, efficient and affordable advice to ordinary Australians who need it most.
“We believe this creates a significant risk,” Abood says. “Financial planners are not lawyers, but it may be that the regulatory and compliance requirements under one act and regulator differ from those of others, leaving financial planners at risk of breaching one requirement in order to meet the conditions of another.”
