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.
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.”