The Client Advice Record and draft legislation for Tranche 2 of the Delivering Better Financial Outcomes reforms has been further criticised by the Stockbrokers and Investment Advisers Association as a “disappointing outcome from two years of regulatory review”.
In a submission to Treasury, SIAA chief executive Judith Fox said the bill falls short as it “merely tinkers around the edges of the existing provisions”.
“It does not deliver on the government’s intent of a clear, concise and fit-for-purpose advice record,” the submission said.
The legislation, released by the Albanese government in March, introduced the Client Advice Record as a replacement for the cumbersome and much-maligned Statements of Advice.
The CAR must cover the advice and its reasons as well as information about remuneration, the adviser and the client’s interests. The only obvious difference is the eradication of the requirement to provide the client with the CAR unless the client asks for the record.
The introduction of the CAR has the additional benefit of the licensees and authorised representatives required to keep records on file for compliance purposes but not required to show these to the client unless requested.
The SIAA said while the bill may reduce the length of the CAR for comprehensive financial planning advice, it will not reduce the length of the advice record in a meaningful way for stockbroking and investment advice.
The association added even if the legislation reduces the length of the CAR, it essentially will result in a reshuffling of the information, rather than a reduction in the time it takes to produce the advice record.
This is similar to feedback from the Financial Advice Association Australia, who said the SOA legislation was “disappointing” and that it would not support the bill without “substantial change”.
The SIAA said it was difficult to provide a complete response to the legislation as it is missing reforms to the Best Interests Duty and safe harbour steps and expressed disappointment that this was not included in the bill.
The submission said this was because the scope of the advice set out in the CAR will be dependent on how the BID provisions enable the adviser to limit the advice to a specific, agreed scope.
“Standard 6 of the Code of Ethics must be removed, and the scope of what is required to satisfy the Best Interests Duty under the Code of Ethics will need to be clarified and refined before these legislated changes come into effect,” the submission said.
Standard 6 of the Code of Ethics states “you must take into account the broad effects arising from the client acting on your advice and actively consider the client’s broader, long-term interests and likely circumstances”.
The SIAA expressed in their submission uncertainty about how licensees who provide managed discretionary account services will meet the requirements of the ASIC Instrument and ASIC Regulatory Guide 179, due to the lack of details on BID reforms that were missing in the draft legislation.
Industry reaction to the CAR has been mixed, with some licensee heads considering it a positive step in the right direction.
Entireti CEO Neil Younger said the CAR was a progressive step and IFM Securities principal Lionel Rodrigues said it was “client-centric” and also provided more flexibility for advisers than SOAs.
However, other industry members were disappointed, including WT Financial Group managing director Keith Cullen, who considered the reform not much more than a name change.
SIAA also recommended that SMSFs be included in the “nudge” provisions of the bill, which currently would only allow APRA-regulated funds the ability to give targeted prompts to members based on certain milestones (like eligibility to enter the pension phase).
