Federal Government moves to cut the compliance burden on the financial planning industry could backfire, creating more questions than answers for advisers.
Despite a lengthy consultation process with the industry over refinements to Financial Services Reform (FSR), confusion remains over new Statement of Advice (SOA) requirements contained in draft legislation released last week.
As part of the refinements, it has been proposed that financial planners will not have to issue subsequent SOAs after their first consultation with a client, but only if the basic nature of the advice, and the client’s personal circumstances, do not change significantly.
But members of the financial planning industry have expressed fears that a refusal by the Government to decipher exactly what constitutes a “significant” change in a client’s personal circumstances could render the refinement, which was intended to lighten the paperwork burden on financial planners, unworkable.
Lonsdale technical services manager Lucille Benitto said the decision not to provide specific guidance left advisers “wide open to take a beating from ASIC”.
“Once you have broad legislation it leaves people in uncharted territory, and the worst thing anyone wants is this leading to compliance taking a ‘belt and braces’ approach and just doing another SOA to be safe,” she said.
Menico Tuck Financial Services director Joanne Tuck said for the refinements to be workable, the Government must take the risk of future hassles with the corporate regulator away from planners by providing more guidance, such as suggesting what a planner should do if a client changes their job or has a baby.
The Financial Planning Association, however, said it was happy for the law to let an adviser choose what constitutes a significant change in their client’s personal circumstances.
“We have always put forward that FSR should be more principles based than prescriptive. If you prescribe the rules in black letter law — that defeats the whole purpose of the refinements,” a spokesperson said.
The Government will allow feedback on the draft legislation until November 4.
