AIOFP hits back at FSC whitepaper

The Association of Independently Owned Financial Professionals (AIOFP) has hit back at the Financial Services Council’s (FSC’s) whitepaper on financial advice as it believes there were flaws in the recommendations.

The AIOFP said it was “cynical of what had been proposed” and that the author of the paper had “cherry picked” every issue they believed had frustrated advisers over the years and “packaged them up to offer hope of a perfect structure after the next election”.

The association’s compliance expert, Phillip Osborne, said the major concerns it had with the recommendations were around safe harbour, the reissue of the code of ethics, changes to the breach reporting regime, statements of advice (SoA), the reform or removal of the financial product advice definition, having a principles based regulatory system, and changes to the education authority regime.

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Osborne said the removal of the safe harbour provisions was “short-sighted” and did not serve any purpose, including the reduction of the compliance burden.

He said it was the work of the Australian Financial Complaints Authority (AFCA) and its “overreach and bias” towards the payments of claims against advisers that needed to be addressed given that the subjectivity of the safe harbour provision.

On the code of ethics, Osborne said the current code issued by the Financial Adviser Standards and Ethics Authority (FASEA) did warrant attention but guidance was needed by the authority on how to interpret it.

“It is only by reading the standards in isolation that they are misinterpreted. Further, what has been ignored by most and certainly by those constructing the white paper, is that those it is applicable to (‘relevant providers’ or as we know them, advisers) need to exercise their professional judgement in how the code applies – that the code does not intend to stipulate how an adviser might specifically act,” he said.

The breach reporting regime, Osborne said, for the automatic reporting of civil penalty breaches needed to be revoked and a return to the previous requirements for a licensee to report only what they determined significant breaches.

On shorter SoAs, Osborne said legislation currently already promoted shorter advice documents and that a more cost-effective and timely approach was to recommend the letter of the law as it stood to be enforced.  

“While we note that the white paper suggests that the advice provider be allowed to exercise their professional judgement in this area, this will continue to be problematic while that judgement is being ignored and overridden by AFCA and subsequently second guessed by licensee compliance regimes,” he said.

“The recommendation to reform or remove the definition of ‘financial product advice’ appears to ignore the fact that when an Australian financial services licence (AFSL) is applied for and granted, the authorisations held under that AFSL are given in terms of financial product.

“We do agree that the providing of advice could be simplified, but this could easily be achieved by simply removing the term ‘general advice’ to have only ‘personal advice” and ‘factual information’.”

The association noted it did not disagree with a principles based regulatory system and that the code needed some adjustment.

“However, to suggest wholesale changes to something that has not presented major problems for industry participants or consumers seems to be changing legislation for the sake of it,” Osborne said.

“Instead, what we believe needs attention is the aspect whereby a ‘relevant provider’ can use their professional judgement (as encouraged by the code) without being criticised or penalised for doing so. Let’s remember that ethics are guidelines to assist judgement – not rules by which judgements are determined.

“If we are as an industry to truly embrace the application of ethics then it is this that we need to work with first.”

Changes to the FASEA regime, he said, needed to be make now and recommended:

  • Recognition of experience to apply for offsetting education requirements;
  • Recognition of such experience to take into account advanced years of an adviser’s service and whether the education burden on them is warranted, based on the time frame to which they would naturally retire from the industry; and
  • Where advisers are not authorised to give advice on financial services/products, that they should not be required to complete a subject of education in that area.

 

On the last point, Osborne said: “To expect this we believe is contrary to the requirements of the code (Standards 9 and 10) and Corporations Act (section 961B(2)(d)), as well as being unethical to expect them to do so”.




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Thanks AIOFP for yet again fighting for Real Advisers. The only association that actually supports real Advisers.
Why do Advisers pay money to other associations like FPA & AFA that are owned and run by institutions for the benefit of product manufacturers. They do not and have never cared about Advisers. Why do you pay these associations to continually kill advisers?

The AIOFP are famous for adviser friendly headlines and little else. They continually whinge and never make a positive contribution to anything. Quick to criticise, last to contribute but hey, everyone needs a home right!

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