Regulation missing on separating advice from products
The financial services sector still lacks regulation that requires advisers to identify when they are providing independent advice and when they are selling products, a law firm partner said.
Hall & Wilcox partner Harry New said this culture is entrenched in the advice system and wondered if there is a way of separating sales from advice so that investors know where those that are distributing products are coming from.
“At the end of the day we see with FOFA (Future of Financial Advice reforms) that it encouraged vertical integration to a large extent where large banks and wealth management organisations built distribution.
“Conflicted remuneration regulation did not change this, although the best interest duty was thought to be sufficient to manage any conflict,” New said.
New wondered if it was possible to have people who just sell products without providing advice.
“At the end of the day anybody who’s providing an opinion that would influence a reasonable retail investor in acquiring a product would be considered advice,” he said.
“So I wonder whether you could actually have a different category where a person is not really providing advice but is just representing the issuer in respect of their products.”
New also questioned if regulation has gone far enough to place the disclosure onus on the adviser so that conflicts of interests are brought to investors’ and clients’ attention.
“Some may argue that in a democracy, people should be given choices and therefore disclosure is the correct medium to bring things like conflicts to their attention rather than saying certain types of investors shouldn’t be allowed to invest in certain products.”
AUTHOR
Malavika Santhebennur
Recommended for you
ASIC has cancelled the AFSL of an advice firm associated with Shield and First Guardian collapses, and permanently banned its responsible manager.
In the run-up to heavy losses expected at the end of the financial year, June has already reported consecutive weeks of adviser losses.
ASIC has banned a former NSW adviser from providing advice for 10 years for investing at least $14.8 million into a cryptocurrency-based scam.
ASIC has sent warning notices to social media finfluencers who it suspects are providing unlicensed financial advice to Australians as part of a global crackdown by international regulators.
