FPA submission urges greater differentiation
The Financial Planning Association (FPA) has used its submission to the Financial Systems Inquiry to argue for greater differentiation between general and personal advice.
The submission, released by the FPA today, claims the current framing of 'general advice’ versus personal advice exposes investors to undue risk, with respect to the regulation of financial advice.
“Many retail investors are not able to distinguish between general and personal advice and are at risk of making inappropriate financial decisions for their specific circumstances as a result,” the submission said. “A review of the general/personal advice definitions, and the risks these definitions pose to consumers, should therefore be considered as part of the Inquiry.”
The FPA submission also calls for institutions and product manufacturers to be seen as intermediaries and therefore be obliged to adhere to similar obligations.
“The concept of a 'gatekeeper’ in financial services has evolved in the last 30 years to describe the obligations of a financial intermediary whose purpose is to protect against misconduct by another party,” it said. “To function effectively in this role, gatekeepers are understood to possess reputational capital as a result of their position of trust, and lose that capital if they engage in misconduct themselves.
“Several professions, such as auditors and lawyers, have already been described as gatekeepers in so far as their interactions with financial systems are concerned, and we believe that it is a useful concept to describe how professionalism should work in financial services.
“For the financial system to operate effectively, product issuers must be seen as intermediaries and adhere to similar consumer and system-oriented obligations and values as those that currently apply to other market participants,” the submission said.
“Product issuers should not be treated as outside this intermediary function. All participants must comply with the same type of obligations, otherwise the financial system will fall apart. This includes responsibilities to both financial citizens and to uphold the integrity of the financial system itself.”
AUTHOR
Staff Writer
Recommended for you
Government has introduced a bill to Parliament to legislate the first stream of the QAR reforms.
ASIC now has a 1:1 ratio when it comes to court success in the enforcement of crypto activities and more action is expected as Treasury seeks to introduce a regulatory framework.
A leading governance body has hit out at “specialist interest groups proposing ad hoc law reform” when it comes to reforms of financial services legislation and believes an independent body is needed.
The release of ALRC’s final report into financial services legislation has highlighted financial advice as a “significant” focus as it seeks to reduce costs and help advisers understand their obligations, alongside the Quality of Advice Review.
