The Financial Planning Association (FPA) has alerted the Australian Securities and Investment Commission (ASIC) to the possibility of its product intervention power leading to product manufacturers seeking to recoup potential losses from intervention via higher fees or reduced services.
In a submission filed in response to ASIC consultation around implementation of the product intervention power, the FPA said that while it supported the measure ASIC needed to consider the implications.
It said one of those implications was that product providers would seek to recoup potential losses from intervention and exampled them seeking to increase fees or reduce service levels.
“The problem will be exacerbated by the potential for the intervention power to affect the management of liquidity by product providers,” the FPA said. “The result is that consumers end up paying for the protection, which may not be the best use of their resources.”
However, the FPA said that it supported the proactive power for ASIC to intervene when a product resulted or was likely to result in significant detriment to consumers.
“We welcome the provision that a type of product intervention includes the mandate of seeking personal advice before being offered the product,” the FPA submission said.