Following today’s implementation of amendments to the Financial Services Reform Act (FSRA), advisers are no longer bound to issue a Statement of Advice to existing clients each time they update a financial plan, so long as there is no significant change to their client’s circumstances.
Instead, FSRA now requires advisers to keep a Record of Advice for seven years, and make this available to clients on request.
The Financial Planning Association (FPA) has welcomed the changes, which are contained in the Corporations Amendment Regulations 2005 (No. 5).
Chief executive Kerrie Kelly said: “The wider use of a Record of Advice rather than a Statement of Advice should be of particular benefit to the many FPA members who have long-standing, ongoing relationships with their clients.”
According to FPA policy and government relations manager John Anning: “Statements of advice are what you have up-front when you come in and get your plan done. If you have a major change – say you’ve been through a divorce – then you will probably go through another Statement of Advice.
“But on the other hand, if there’s nothing to disrupt the advice, you might get a Statement of Additional Advice or you might get a Record of Advice, it all depends on the severity. And that’s that whole issue of significant change.”
Anning said examples of advice which would fall into the Record of Advice category included portfolio rebalancing, or where an individual has decided to roll out of one managed fund into another.
He added: “So the fundamental advice hasn’t changed, they are still on track with the advice model. So that’s how we [the FPA] are viewing records of advice.”
Other refinements to FSRA include allowing licensees and advisers to tailor their Financial Services Guides (FSG) to those services or products they are likely to be providing to a client, and remove information from an FSG where that information has already been documented in a Product Disclosure Statement.
According to Parliamentary secretary to the treasurer Chris Pearce, the majority of reforms focus on ways to ensure that disclosure (both written and oral) operates effectively as an information tool for consumers, rather than a means for financial services providers to demonstrate compliance with the legislation.
