Call to let advisers and clients agree scope up-front

Financial advisers and their clients should be able to agree the scope of advice upfront, thus providing greater certainty around what is provided including intra-fund advice, according to one of Australia’s largest superannuation lobby groups, the Association of Superannuation Funds of Australia (ASFA).

In a submission to the Australian Securities and Investments Commission (ASIC) affordable advice review, ASIC has canvassed updates to ASIC’s regulatory guide 244 to provide clearer explanations on how the best interests duty can be met if an adviser agrees with the consumer to provide limited scope advice upfront.

“Currently, when giving personal advice, there is a requirement to provide advice in areas that a consumer hasn’t necessarily requested, but which may be relevant to their circumstances. The reason why this additional advice might be required even without the explicit request from the consumer is due to uncertainty around scoping advice,” the ASFA submission said.

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It said this “adds to the complexity of advice and increases the cost of delivering it”.

The ASFA submission said it might be beneficial to explore the concept of providing strategic recommendations to consumers only rather than product recommendations.

“Consumers can then refer to their current providers or seek new providers through their own research,” it said. “There are concerns that, in this situation, consumers may not implement the advice they’ve been given. To overcome this, advisors could assist with implementation once a consumer has made a product choice or provide follow up advice if a consumer has a list of products but is uncertain about which product would suit their personal circumstances the most.”




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The real issue is to allow the client & the adviser to mutually agree on the scope of any ongoing fees renewal arrangements, in conjunction with the overall service package, without excessive regulatory interference.

“Currently, when giving personal advice, there is a requirement to provide advice in areas that a consumer hasn’t necessarily requested, but which may be relevant to their circumstances. The reason why this additional advice might be required even without the explicit request from the consumer is due to uncertainty around scoping advice,” the ASFA submission said.

And this from a group which could be said to be PRO-ASIC

The ASIC rule is total rubbish. The client should be the final arbiter on want tjhe advice to cover, with a warning from the adviser. SIMPLE !

This just to me confirms that ASFA has no idea of the requirements of providing advice under Best Interest Duties as well as the FASEA Code of Ethics. Why are these lobby groups which act on behalf of Product Providers (in this case Industry Super Funds) continuing to push this wheelbarrow when it should be the organisations representing Financial Planners who have the full understanding of the compliance requirements in provding advice.
This is just another irrelevant organisation tryng to circumvent the regulations as laid down by ASIC and FASEA to keep their masters at ISA happy.

Ah yeh - it’s commonly called an engagement letter, outlying the scope of work discussed and verbally agreed, the costs and the benefits, a 2 pager, to be signed off by client.
However, ASIC and AFCA in their overly paternalistic approach to everything Advice won’t clearly let Advisers and Clients decide what work to complete.
These Dictator bureaucrats want to force both the Adviser and Client to do everything that ASIC and AFCA want, regardless of costs or needs of the clients.
Great job ASIC and AFCA, your Dictatorship of Advice must stop.

Thanks again RC for allowing vertical integration to come back alive and stronger than ever. This will play straight into the hands of the big players whether retail or industry. They will have the army of salaried planners trolling through the orphan clients they created. Good luck for the rest of us when a client comes back 20 years later and sys they didn't understand the limited scope thingy. I'm sure we'll get a lot of sympathy.

I have now read the (full) 3 page submission that ASFA has submitted to ASIC titled 'Promoting access to affordable advice for consumers'....

If that half-thought through, jumbled, and clearly inadequate contribution from ASFA is their 'best effort' then they should just stay out of it!

ASFA has never led any of the discussions on 'advice' at anytime in the last 30 years - don't see why they should start now.

P.S. I was formally a Chairman of ASFA's Retirement Study Group many years ago. In my time we assisted government (Peter Dawkins as Federal Treasurer) in confirming the validity of 'account based pensions'. Probably the only meaningful thing ASFA ever achieved when it comes to the retirement phase of superannuation.

It's an issue because advisers pick a strategy or solution they like and sell that package while ignoring other issues. Anyone who's been a life insurance BDM knows the market is choc full of "investment specialists" who gloss over insurance and estate planning needs to chat about the brilliance of their portfolio skill. The client doesn't know any better, how are they supposed to know that there are other areas of advice they should consider?
The framework around how an SOA is drafted / scoped etc is a nightmare but the core reason for having a financial adviser consider the broader impact of their advice is sound.

Maybe if, when we have a single disciplinary body who provides guidance, regulates and adjudicates on cases (instead of AFCA), we can have a simple template that has discussion points that need to be discussed, like a checklist but with this checklist coming straight from an AFCA like authority?
Maybe this can help?
I see your point regarding some advisers wanting conversations to head in the direction of their own specialty, but things are extremely difficult at the moment, I think there should be a relatively simple solution.

Correct Michael, in the old days the adviser just scoped everything out that was too hard or where he didn't make any money, but the world has changed - we have an overriding FASEA structure that doesn't allow that and correctly so. The issue is that we have to evidence the reason for the scoping out and the considered alternatives - rather than just trust professional adviser judgement. It is the evidencing that is costly. And if an adviser is scoping to fit the business model, not professional advice, then surely they will be caught by the regulator. It's become horse before cart.

You're right. The world has changed - now you need to include everything and price the advice at the point a client vomits in their mouth and then pair it back based on what they can afford.

A point I've made many times for years now is that removing the conflicts is great - it really is but it has to go hand in hand with a reduction in compliance. You could even do insurance advice without commissions if all you had to do was a needs analysis and a "script" for the insurer to follow.

And to your point about relying on professional adviser judgement, this couldn't be more true. But the thing is, we'd still want to evidence that anyway to help in the case of any dispute - which is what the other professions do.

I don't have a problem with that so much as all of the voices out there prescribing how this basic professional duty should be done, and their motivations for doing so.

So, instead of a simple note like:
'Met with CLIENT. In discussion identified 7 issues. Broadly explained problems, proposed priorities. Client agreed with most, but wishes to disregard C, D and F for now to focus on A, B and E. I explained risks involved, I believe client understands issues because of X, Y and Z. I'm to prepare engagement letter to reflect discussion and send to CLIENT for review by DATE."
we have 3 page mega-notes running down every dark alleyway of potential financial impact, copious amounts of unnecessary exploration and disclaimers that add hours to the advice process.

All so we don't fail an audit performed under fuzzy licensee guidance with only a tangential relationship to the law, or end up in front of one of the 37 different regulators who all have the right to critique our files.

Our work is complex but it doesn't really need to be quite this hard.

“Consumers can then refer to their current providers or seek new providers through their own research.”

Sure they can. Then they'll come back to ask us what we think of their choice and we'll have to do another SOA to answer the question.

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