Financial advice needs modern definition

The definition of a financial adviser needs to be brought “into the 21st century”, according to The Advisers Association.

Referencing the Financial Services Council (FSC) white paper, released earlier this month, which was a blueprint for a simplified regulatory framework that could reduce the cost of providing financial advice and allow advisers to spend more time with new and existing clients.

According to the Australian Securities and Investments Commission, a financial adviser was defined as an Australian Financial Services licensee, authorised representative, employee or director of an AFS licensee who was authorised to provide personal advice to retail clients in relation to relevant financial products to retail clients.

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However, this definition placed too much emphasis on financial products, Neil Macdonald, chief executive of TAA said.

“There is a 20-year-old definition of what an adviser does, we need to bring it into the 21st century especially in terms of regulation,” he said.

“There is a lot of focus on products and the DDO [design and distribution obligation] requirements which talk about advisers being ‘distributors’ of products. But, in real life, advisers spend a lot of time talking about a client’s circumstances and various strategies before they get to discussing products.

“The definition at the moment means you can’t even talk about superannuation.”

Within the FSC paper, it said there were nine different definitions of advice including scaled advice and intra-fund advice.

“The existing framework consists of nine different definitions of advice,40 such as ‘intra-fund advice’, ‘strategic advice’, ‘scaled/limited advice’, which are confusing regulatory terms that do not resonate with consumers,” the paper said.

“Analogous with other professions, the FSC seeks a regime in which an advice provider either provides financial advice or does not, with all advice considered personal advice except where it is simply general information.”

Macdonald also suggested the levels of professionalism and educational standards now required to be a financial adviser should also be reflected in the industry’s standing.

“If I go to a doctor, they don’t have to give me a disclosure, it’s assumed what they are recommending is the best for me. They don’t have to prove why that is.”




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Completely agree - products are just a method to structure the advice. It’s important to help clients understand their products and recommend appropriate ones but it’s not the focus and definitely not the most important aspect!! Currently Advice makes it all about the product unfortunately and we need to move on from this - my mechanic buys the parts I can both afford and will suit the car - I don’t question he researched the origins on the part manufacturing and reported back to them the appropriateness and satisfaction I have with the part … it’s ludicrous!!

Pollies, ASIC & so called Consumer groups have spent 20 years building an enormous towering pile of Regulatory CRAP.
Every time they think, speak and act their only response is to continue to build on this almighty pile of Regulatory CRAP.
The entire pile of Regulatory CRAP including the Pollies who over see it like Frydenberg, Hume, Regulators like ASIC & Ms Press & so called Consumer advocates need to be flushed down the CRAP trap.
Then start again from scratch with no past pile of stench, no Frydenberg, no Hume, no Ms Press, no Choice Mag, etc
And actually listen to Real Advisers and our clients. Only then do we have a chance.

This is 100 per cent true and about 20 years too late in being recognised. All the legislation is based around advice relating to financial products. This is why ASIC is always seeking to expand the definition of financial products, and why AFCA seeks to bind any complaint to financial products, no matter how tenuous the link. The consumer protection provisions of the Corporations Act need a complete re-write.

The AFSL system should focus on product providers. An adviser should not need to go through an AFSL to provide advice. We are directly registered with ASIC. We have a code of ethics and education standards, Why do we need an AFSL. The increase in the cost of advice is due to the out dated AFSL system. The burden of an adviser having to belong to an AFSL and pay a huge fee to an AFSL is the real problem with our profession.

So you think there would be less regulation if advisers did not need to authorised by an AFSL? You're dreamin!

Spot on "Lets move forward" - been saying this for some time. We can't innovate or reimagine a modern iteration of the industry when still shackled to this old white man lawyers legal view of advice or an advice provider. Now they've hammered everyone about becoming a profession it should come with the same framework applicable to other professions - simple, easy to consume recommendations wrapped in professional judgement. Every time this govt tinkers with this industry they just add more BS for everyone to do...nothing of any meaning gets taken away so it's just layer upon layer of stupid. belligerent red tape and admin

The whole debate needs to be extended way beyond financial product, and even financial strategy. We need to start with who or what is a client?
We are client centric and when looking at a 'client' we look at the entire family structure (client, partner, Trust, SMSF companies etc) as one - before applying a separate lenses to each individual's distinct interests. Often we house teh high growth portfolio in the SMSF with the Trust and or individual's being the counterbalnce to achieve th eclient's risk profile.

Theoretically - i.e from the current product construct, we are designing portfolios in both the Trust and the SMSF which are in isolation, in opposition to the 'clients" (read Trustees) risk profile.

A root and branch review is required - starting with the active involvement of some real advisers - not academics, not solicitors and for God's sake, not politicians.

Who is The Advisers Association and why are we wasting time on such subjects? Oh, I now - self promotion for a a minor association.

It is the AMP Advisers Association. They changed name to remove the "AMP" bit, as that brand has become so toxic. The whole of AMP should do the same.

I agree that the legs and regs don't adequately consider what financial advice is. It is stupid to consider that advisers are nothing more than product distributors and salespeople. Strategy is king. You start with strategy and don't even contemplate product characteristics until you then start looking about the best vehicles to use to implement the strategy. Many of us have been arguing for a separation of product and advice for a long time. The one sticking point that still ties us to product (which is why the doctor and the mechanic analogy doesn't work as neatly as it should) is asset-based fees and vertically integrated product channels where the fee is not tied to the provision of the service but to the amount of funds under advice/funds under management (or quantum of life insurance taken). You have an entire ecosystem of providers from licensees taking a fee for the in-house MDA/SMA, platform operators, fund managers, superfund trustees etc that don't charge a set fee for their service. They instead clip the ticket with a percentage at every stop along the value chain value with an amount that is tied to the amount invested that has very little evidential nexus to the value of the service they provide. The broader financial services industry is addicted to basis points and growing FUM and the one professional that runs point on building FUM is the adviser. So you can see why its hard to shake the tag of being grubby product salespeople.

Do people just read the Press Release and cut and paste it? What's with the continued referencing of the FSC Paper. Yes, some sound recommendations (most previously rejected, hence why you put them in) but really wasn't a fan of the fine print and the recommendation to get rid of Advisers and replace them with an online calculator and expansion of intra fund advice for Hesta and AwareSuper...key partners of both the AFA and FPA. Seems like the AFA is going to make it harder for face to face human advice and easier for a guy in a call centre selling Hesta, by saying we need a different term and a different set of rules as suggested by the FSC which lives you over regulated.

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