The Safe Harbour provision does not provide as much protection as advisers expect and could be abolished in due course, according to The Fold Legal.
Writing on a blog, solicitor director Simon Carrodus, said the Safe Harbour, which was designed to provide advisers with certainty in acting in the best interest of their clients, did not provide much protection for advisers with respect to the FASEA Code of Ethics Standard 2.
Standard 2 of the Code of Ethics, due to come into force on 1 January 2020, states advisers must act with integrity and in the best interest of each of their clients.
It had already been recommended by Commissioner Kenneth Hayne that the Safe Harbour provision was repealed at the end of 2022. This was because Hayne felt it encouraged a ‘form over substance’ approach to advice. He felt that removing it and focusing on Best Interest Duty (BID) instead would mean advisers focused more on the quality of their advice.
Carrodus said: “While the Safe Harbour provision was designed to provide advisers with a degree of certainty with respect to the BID, we don’t believe it provides as much protection as many advisers and licensees think. Our view is that using a Safe Harbour checklist alone is probably not enough- it really should be combined with an assessment of the appropriateness of the advice provided.
“For the moment, the Safe Harbour provision lives to fight another day, but it may not be with us much longer.”
Comments
When you study the ASIC Regulatory Guides (for your FASEA National Exam) about Best Interest test, several illustrations indicate that "best interest" is whatever the client thinks it should be (on the day). ie it could be the degree of platform usability, or it could be low fees - whatever the client thinks it should be. It is becoming obvious that FOFA is a total joke. And it will eventually self-destruct under the Intra-fund provisions.
Can someone please remind me which way is up. We're all grappling with 'best interest', 'Safe Harbour' and now there's talk that it won't be around for much longer. The mantra should be what it was; 'appropriate advice' based on sound assessment, consideration and recommendations. Why does it have to be so complicated ?
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