ASIC's guidance document on scalable advice should be welcomed for one thing, the manner in which it proposes to remove the class relief granted to superannuation fund trustees relating to provision of intra-fund advice.
If the Australian Securities and Investments Commission’s (ASIC) guidance document on scalable advice should be welcomed for one thing, it should be welcomed for the manner in which it proposes to remove the class relief granted to superannuation fund trustees relating to provision of intra-fund advice.
By proposing to withdraw the class order relief, the regulator has clearly signalled it believes there should be a level playing field with uniform obligations imposed on those providing ‘scaled advice’, whether they are financial planners, accountants or superannuation fund trustees.
While much was made of the 2009 Government-backed decision to provide a class order allowing superannuation funds to provide ‘intra-fund’ advice, it ultimately proved to be little-used by superannuation fund trustees, with most opting to go down the route of more holistic advice.
One of the key elements of the ASIC approach to scalable advice is that it suggests the obligations imposed on those providing the advice will also be scalable with respect to the suitability of the advice for the client and the level of inquiry and analysis required.
However, the ASIC paper is silent on the issue of a ‘best interests’ test – something that has been raised as an issue of concern by the Financial Planning Association (FPA).
Given the potential complexity of the issues, the FPA is probably also right to be concerned about topics such as transition to retirement, Centrelink and retirement planning to be included within the broad gamut of scaled advice.
ASIC needs to be careful to ensure that the level playing field it will create by removing the class order relief granted to superannuation funds will not again be distorted by allowing too much scope for invention within the definition of scaled advice.
Then too, financial planners and others should note that the ASIC documentation makes frequent reference to the legislation that will evolve out of the Federal Government’s Future of Financial Advice (FOFA) changes.
Implicit in those references is that whatever recommendations the regulator may have made within the discussion paper, the ultimate shape of the new scalable advice environment will depend on the content of the legislation the Assistant Treasurer and Minister for Financial Services, Bill Shorten, ultimately introduces to the Parliament.
It is to be hoped, however, that the minister and his advisers have made themselves fully familiar with the ASIC discussion paper and, not least, its proposed removal of the 2009 class order relief. Financial advice, delivered from no matter what quarter, should be subject to uniform legislation and uniform regulation.
As superannuation funds move further and further into the competitive delivery of financial advice, they must be made to play by the rules.
