The Australian Securities and Investments Commission (ASIC), the Financial Adviser Standards and Ethics Authority (FASEA), licensees and regulatory uncertainty represent some of the major impediments to financial advisers being able to deliver cost-effective, good quality limited financial advice.
That is the assessment of the Association of Financial Advisers (AFA) which has suggested that while clarification of the rules around delivering limited financial advice will help, advisers are currently being hamstrung by the reality that the current rules make it almost as expensive to deliver limited advice as it is to deliver holistic advice.
In a submission filed with the Australian Securities and Investments Commission (ASIC) affordable advice review, the AFA said the cost and complexity of providing limited advice “is only marginally less than that involved in providing more comprehensive advice, reducing the incentive for doing this”.
“It is also acknowledged that some licensees make it difficult to provide limited advice,” the AFA submission said.
It said that financial advisers encountered difficulties in resolving the scope of advice with the client, that would enable the them to have total confidence that they will not be challenged for narrowing the scope inappropriately in circumstances where, often, new and even existing clients do not have a clear understanding of the scope of the advice that they are seeking.
“The FASEA code of ethics and some licensee standards make the determination of the scope of the required data collection exercise more complicated than it needs to be for limited advice, often resulting in the decision to seek more information than is relevant or necessary for the advice that has been agreed,” the AFA submission said.
“The requirements in the FASEA code of ethics to consider the clients broader circumstances and likely future circumstances places constraints on how straight forward the provision of limited advice can be.”
The AFA submission said that it was against this background that financial advisers and their licensees needed greater regulatory certainty.
“Licensees need to have confidence that they can encourage their advisers to provide limited advice, without fear that they will subsequently be called out for a breach of the obligations,” it said.