The Financial Planning Association (FPA) has written to the Government warning that unless exemptions are granted, financial planning firms will be encumbered by a double regulatory burden as a result of the new National Consumer Credit Protection legislation.
FPA chief executive Jo-Anne Bloch said the approach being adopted by the Treasury and the Australian Securities and Investments Commission (ASIC), if continued, would mean that Australian Financial Services Licensees would be required to take on another layer of regulatory compliance.
“Requiring a licence simply to be able to provide effective budgeting and debt management advice as part of a financial plan is overkill,” she said.
Bloch said the organisation had written to the Government seeking exemptions and pointing out that Australian Financial Services Licence holders and financial planners were already subject to a higher standard of legislative obligation under the Financial Services Reform Act.
She said the potential doubling up of regulation had occurred despite assurances to the contrary by ASIC and Treasury.
The FPA has expressed its concerns at the same time as ASIC has released a consultation paper detailing how it intends administering the new legislative framework.
That consultation paper, while not dealing with lending with respect to margin loans, effectively outlined a regime similar in nature to the obligations already imposed on financial planners in terms of the suitability of financial advice.
The consultation paper’s statement that “the key responsible lending obligation is that licensees must ensure that they do not provide a credit contract or lease to a consumer (or suggest, or assist a consumer to enter into, a credit contract or lease) that is unsuitable for the consumer”, demonstrates the degree to which the new legislation mirrors the intent of the Financial Services Reform Act.
Bloch said the FPA believes that the root cause of the problem is the definition of ‘credit assistance’ within the new legislation, which is too broad and captures very basic and obvious issues relating a client’s financial position.
She said these were elements already effectively dealt with by financial planners every day under the auspices of the Financial Services Reform Act.