ASIC has clarified the distribution of Financial Services Guides is not required when dealing in financial products as a result of providing financial advice.
Changes to how FSGs can distributed by advisers – either by continuing to give them to the client directly or by displaying it publicly on their website – was one the few inclusions of Tranche 1 of the Delivering Better Financial Outcomes bill.
However, the industry had raised concerns the legislation didn’t cover the provision of product advice, rendering the legal change largely moot.
The Financial Advice Association said it had been working with ASIC since September to clarify the rules for advisers.
FAAA general manager for policy Phil Anderson said in a media statement the relief was welcomed by financial advisers.
“This relief resolves a problem that was identified in the law following the passing of the Delivering Better Financial Outcomes bill, where the service of dealing was unintentionally not captured by this reform,” Anderson said.
“Dealing, which includes implementing a product that has been recommended as part of the provision of financial advice, is a critical service provided to clients. This relief now provides certainty to enable financial advice businesses to rely upon the FSG reform in the DBFO bill.”
The instrument, dated 22 October and published by ASIC senior executive leader for financial advice Leah Sciacca, clarified that advisers could rely on website disclosure information instead of providing a FSG when dealing in financial products as a result of providing financial advice.
However, Anderson noted that ASIC’s relief was temporary, and the association was working with the government for a permanent solution.
The FSG hiccup has been one of many drafting issues with the first tranche of DBFO legislation.
After the highly anticipated draft legislation was released last year, it was quickly discovered that much-needed reforms that would simplify fee consent renewals by having a standardised form was not mandated potentially rendering the change useless.
“But let’s be clear, we will prescribe a form if we need to,” Jones said when asked by Professional Planner last year about the discrepancy.
“The objective is to have a single form that advisers can use. We’ve consulted on the draft; if we can’t get there by one means we’ll get there by another.”
This was later fixed when the legislation was tabled to Parliament which gave the minister explicit powers to mandate a unique form for the industry to use, although this is yet to happen.
Once the legislation was tabled in Parliament, two further drafting issues were found – one that almost invertedly banned commissions for general insurance and another that the industry criticised would mean super funds would have to review every Statement of Advice.
Despite assurances from the government and ASIC that it would be required for funds to vet every SOA, the legislation was eventually altered when it finally passed Parliament.
While Treasury has taken the fall for the drafting errors, the shortcomings in the reform process have given plenty of ammunition to the Coalition ahead of the next election with Shadow Minister for Financial Services Luke Howarth piling on the issues with the bill.
“It’s been 593 days since Stephen Jones was handed the Levy report and not a lot has been done in that time,” Howarth said almost three months ago at an industry event.
