The Australian Securities and Investments Commission (ASIC) has been taken to task by the Stockbrokers and Financial Advisers Association (SAFAA) over reports relating to personal advice reviews which it claims fail to take account of the status of the scaled advice model.
The SAFAA has raised the issue of “considerable concern” with ASIC in the context of the organisation’s submission responding to the regulator’s affordable advice review with the SAFAA claiming ASIC’s approach is in conflict with the law on scaled advice.
The SAFAA said it considered that ASIC’s view “conflicts with the provision of limited advice and evidences a complete misunderstanding of how stockbrokers provide limited advice”.
“It has come to our attention that at the same time ASIC is looking to encourage the implementation of scaled advice, our members have received reports from ASIC relating to personal advice reviews conducted by it in 2018 and 2019 that conflict with the law on scaled advice,” the submission said.
“The reports relate to a surveillance ASIC conducted on the retail financial advice business of eight [Australian Financial Services] AFS licensees who are ASX market participants. The purpose of the reviews was to understand the participants’ advice businesses, to the extent it involved the provision of investment-related personal advice to retail clients. An area of focus was the steps the participants had taken to comply with their obligations under Chapter 7 of the Corporations Act regarding the provision of that advice.
“The ASIC reports that we have viewed cause us considerable concern about ASIC’s approach to the provision of scaled advice to stockbroking clients, and in particular, the level of enquiries ASIC asserts stockbrokers must make and the records that are required to be maintained to comply with the Corporations Act provisions on scaled advice.
“Worryingly, the reports we have viewed do not take the scaled advice model into account, but presume that each client should receive a full advice service when this is not the case. We are advised that most of the files reviewed by ASIC related to clients seeking transactional advice concerning stockbroking services where there was no need to undertake the depth of enquiry, provide the level of detail in disclosure documents or maintain the level of detail in client files or order records that ASIC stated in the reports as being necessary.”
Outlining observations made by ASIC, the SAFAA said: “We consider that this view conflicts with the provision of limited advice and evidences a complete misunderstanding of stockbroking and how stockbrokers provide limited advice”.
“There is an assumption that stockbrokers must provide full-scale financial planning style advice and conduct a full fact find. There is an assumption that to provide compliant advice, an adviser should conduct an annual review of the client’s personal circumstances. There is also an assumption that clients who contact their stockbroker for advice do not understand the services they are receiving, notwithstanding the disclosure stockbrokers are required to make to clients before providing services to them and the complete lack of any evidence by ASIC that customers of stockbrokers are in fact confused.
