There is a risk that the proposed reforms from the Quality of Advice Review will solve one problem but create alternative ones in its place, according to the Financial Planning Association of Australia (FPA).
The organisation said it supported the overall intent of the reforms, which would see the industry move to one that was principles-based, but still had concerns.
These were particularly regarding consumer protections where the FPA worried the reforms might encourage avoidance behaviour.
“Licensees, particularly product providers, will be able to determine their own requirements to protect consumers, including competency of representatives, while at the same time relaxing disclosure requirements. It is unclear how the new requirements will interact with the Code of Ethics.
“There is a risk that the proposed reform package is solving one problem but creating another. It provides greater flexibility and professionalism for planners, but relaxes requirements for product providers who would operate under different rules and would not be assessed as stringently as more qualified financial planners are assessed, leaving consumers exposed.”
It recommended the reforms included appropriate consumer protections and provider transparency to avoid any possible opportunities for misconduct. The law must include an obligation on providers to act ethically towards consumers and put the consumer’s interest first.
The FPA had similar concerns around avoidance behaviour when it came to the proposed personal advice definition. This included reduced client information being asked or held by advisers so that interactions would fall outside the scope of personal advice, resulting in the client misleadingly believing they had received personal advice.
“It is unclear how the proposed definition and a ‘good advice standard’ would be implemented to sufficiently drive providers to ensure their ‘input processes’ made certain that consumer information and interactions were appropriately captured and recorded.”
