Planners not exempt from credit regime
Financial planners may doubt the need for a credit licence, but the new National Consumer Credit regime encompasses their advice in certain circumstances.
The Australian Securities and Investments Commission (ASIC) has released its first regulatory guidance in which it highlights that financial planners might be required to hold a credit licence or be covered by their principal’s credit licence should they offer advice that amounts to credit assistance under the National Credit Act.
Regulatory Guide 203 details, with examples, what constitutes credit assistance, which applies to financial planners advising in the areas of debt management, existing mortgages and salary packaging.
“This is one area financial planners don’t often think about,” said the principal of Innoinvest Consulting, Su-King Hii. “But I believe this is an area where financial planners could get into regulatory strife if they provide the relevant credit assistance to clients without appreciating the implications of the licensing requirements.”
He said while it might not apply to many planners, it is nonetheless important for them to review the scope of their advice to clients.
“Often financial planners will offer advice around those three areas that ASIC mentioned as part of their incidental service,” Hii said. “It’s one of those things that may cause them a bit of trouble if they don’t do it correctly.”
Examples of what constitutes ‘credit assistance’ are detailed in RG 203.44.
“If the financial planner’s activities are caught under the Act, it is critically important for them to plan ahead for the registration and licensing processes as there are preliminary steps that need to be completed to make the registration process easier and quicker,” Hii said.
Those who engage in credit activities can apply to ASIC to be registered between April 1 and June 30, 2010, after which time they will have six months to apply for an Australian Credit Licence.
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