FPA calls for end to product manufacturer exemption
The licensing exemption which allows financial product manufacturers to give general advice about their products should be removed because it distorts the market, according to the Financial Planning Association (FPA).
The FPA used a submission to the Productivity Commission review on Competition in the Australian Financial System to argue for an end to the exemption stating that it distorts the market in favour of the product issuers and depletes consumer protections.
“It promotes a sales culture and is counter to and undermines the financial advice best interest duty in the Corporations Act,” the submission said.
It suggested that leaving the exemption in place would serve to undermine the raft of recent reforms including the Future of Financial Advice (FoFA) and the Financial Adviser Standards and Ethics Authority (FASEA) regime.
“The Government has spent the last 8 years bolstering consumer protections around the purchasing of financial products through the introduction of the Future of Financial Advice (FoFA) reforms, the new financial adviser professional standards and ethics regime, and the soon to be introduced product design and distribution legislation and enhanced ASIC regulatory powers.”
At the same time as calling for an end to the product manufacturer exemption, the FPA submission said the organisation supported renaming ‘general advice’ and the requirement that the term ‘advice’ only to be used in association with ‘personal advice’ that takes into consideration personal circumstances.
However, it said it opposed the ‘removal of licensing and regulatory obligations currently associated with some or all forms of general advice’.
It said the intent of renaming ‘general advice’ had to be associated with removing the consumer confusion associated with the term.
“Consumer protection mechanisms must not be watered down - the regulations that currently apply to ‘general advice’ should remain under the new name as they provide vital consumer protection mechanisms,” the FPA submission.
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