Fiduciary duty nothing new
Care needs to be taken in mandating a ‘best interest’ or fiduciary-like duty, because it would imply that one did not already exist, according to Argyle Lawyers principal Peter Bobbin (pictured).
“To introduce a best interest or fiduciary duty as a new standard implies that it didn’t exist before. This would be a surprise to the many professional financial planners who always considered it to be the standard that applied to them, and the standard that they applied to client servicing,” said Bobbin.
“And to the extent that it is a new standard, there will be two client/planner relationships pre and post implementation. How is the cross over of the new standard to be applied?”
The Treasury and the Future of Financial Advice Peak Consultation Group is currently mulling over two possible approaches to a proposed best interests duty: one that is outcomes based and considered by some to be closer to a fiduciary-like duty, and another that is process-based. Bobbin said that whichever route Treasury and the consultation group took, consideration needed to be taken regarding what standards financial planners were currently operating under and what kind of relationship already existed between planners and their clients.
Argyle Lawyers associate and member of its financial services team, Lisa Chambers, said Treasury’s fiduciary-like duty option was problematic in the financial planning context because it would “almost certainly be subject to caveats and qualifications”.
“This would dilute the impact and undermine what should be the true intent of facilitating better advisory outcomes for clients, as licensees and advisers grapple with implementing processes and policy frameworks to ensure they can safely navigate the obligation,” she said.
“Imposing a best interest standard and then watering it down seems somewhat redundant.”
Chambers felt that the second option was more client-focused, facilitated a quality of advice approach, could be effectively implemented at the practice level, and recognised the subjectivity of financial advice and the complexities imposed by the advisory relationship.
Bobbin said his own frustration with reform in this area lay in the fact that the courts had only just come to grips with the financial planning standards imposed by the Financial Services Reform legislation, and would now have to reassess them all over again.
“By necessity, courts will always be four to six years behind new legislation because it takes that length of time before an issue is brought before a court to be dealt with under the new Government views expressed in new legislation,” he explained.
Recommended for you
ASIC has launched court proceedings against the responsible entity of three managed investment schemes with around 600 retail investors.
There is a gap in the market for Australian advisers to help individuals with succession planning as the country has been noted by Capital Group for being overly “hands off” around inheritances.
ASIC has cancelled the AFSL of an advice firm associated with Shield and First Guardian collapses, and permanently banned its responsible manager.
Having peaked at more than 40 per cent growth since the first M&A bid, Insignia Financial shares have returned to earth six months later as the company awaits a final decision from CC Capital.
