AFA cries out for certainty on how AFCA judges complaints

The financial advice profession needs more certainty on how the Australian Financial Complaints Authority (AFCA) will judge a complaint, says the Association of Financial Planners (AFA).

In its submission to the Quality of Advice Review Issues Paper released earlier this week, the AFA said many advisers were particularly concerned with by the standards that were set through the decisions made by AFCA.

“It is one thing to have regulatory certainty in terms of what the Australian Securities and Investments Commission (ASIC) expects to comply with the Best Interests Duty and related obligations, however if advice assessed by ASIC as compliant was assessed as non-compliant by AFCA, then this fails to pass the test,” the association said.

The AFA argued there needed to be a high level of consistency between what licensees thought was compliant and what ASIC and AFCA thought was compliant.

“We believe that this could be addressed by AFCA producing more guidance and through the establishment of forums to discuss their interpretation of cases,” it said.

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Further key recommendations included:

• The regulatory obligations for the provision of financial advice should be proportionate to the level of complexity and risk of client detriment;
• Achievement of regulatory certainty to better enable the provision of limited scope advice, including in terms of the requirements for the fact find process;
• Increased regulatory certainty on the obligations with respect to demonstration of compliance with the Best Interest Duty;
• Removal of the Best Interests Duty safe harbour and ability to demonstrate professional judgement or repeal of the “other steps” obligation and the ASIC record keeping class order;
• Fix existing issues with FDS compliance or removal of the requirement to report the previous year fees, which are already reported in product statements;
• Greater flexibility in the use of Records of Advice, including increasing the threshold for small investments and expanding it to include small life insurance cases;
• Enable greater access to client data through the Consumer Data Right, ATO Portal, my.gov.au and Centrelink;
• Retention of upfront life insurance commissions, but increased to 80% and a reduction in the year two clawback rate; and
• Support for small businesses to appoint Professional Year candidates and relaxation of some of the PY program obligations.