Pressureis mounting on the Federal Government to amend elements of the Financial Services Reform Act (FSRA) following the unprecedented pooling of industry lobbying power.
Five of the industry’s key financial advisory associations have thrown their weight behind approaching Government, arguing for it to amend the laws relating to statements of advice (SOA).
The matter was initially reported byMoney Managementback in August after revealing the Boutique Financial Planning Principals Group (BFPPG) had approached Parliamentary Secretary to the Treasurer Ian Campbell to amend the Act.
At the time, the BFPPG claimed the law favoured “large product distribution shops producing non-tailored, press-the-button advice” at the expense of small dealer and planning groups.
Since then, the BFPPG has enlisted the support of the other major industry associations – theFinancial Planning Association, the Financial Planners Federation of Australia, the Association of Independently Owned Financial Planners andCPA Australia.
“It takes people time to fully understand all the implications of the law, and that’s why it’s only now that there’s a growing awareness of the problems that are there,” BFPPG president Bruce Baker says.
Baker says in its existing form the Act exposes planners to criminal and civil liability in situations where they may not be at fault.
According to Baker, under existing law it is too easy to find an SOA technically defective, opening the adviser up to legal action.
“Even planners who are behaving ethically, honestly and are providing good advice can be thrown in jail or fined from a criminal offence angle,” Baker says.
However, Baker says planners should be more concerned with the civil liability issues arising from the legislation, as theAustralian Securities and Investments Commissionis less likely to use the Act in relation to finding planners criminally liable.
“Any time that the market takes a downturn, even when good advice is provided, we’re going to see a flood of law suits from vexatious clients,” Baker says.
