Are you confused as to how to apply the best interests test to your clients? ASIC has attempted to clarify the issue, and it’s not all about wealth creation.
Speaking at this week’s AFA National Conference, ASIC commissioner Peter Kell explained that the best interests duty is one that applies to all advisers.
“It’s important to note that the new best interests obligations apply to the advice provider. so this is generally the people who provide the personal advice,” he explained.
However, Kell added that working in your clients’ best interests doesn’t necessarily equate to making them better off financially.
“There are a number of qualifications around this,” he said. “There is no hindsight re-examination of the advice. And it’s also not in some very narrow sense a test of a better financial position.
“In many cases good advice will put the consumer in a better position because they have a much better understanding of their financial situation, and what they have to do to improve it over time.”
He added that questions still remain as to how an adviser’s approved product list (APL) interacts with their best interests duty. Most notably, he explained that ASIC plans to offer guidance on how to deal with a client whose existing products aren’t on your APL, and also where your duties lie when your APL is restricted to one class of product.
ASIC has received over 20 submissions on the best interests issue, said Kell, and expects to release its final guidance on the subject by December.
He added that much of ASIC’s consultation has been explaining the interaction between best interests and scaled advice, explaining that ASIC’s position “has always been that advice is scaled, and that the vast majority of advice sits somewhere in the spectrum”.
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Cameron Howlett on 05 Dec 2012 03:05 PM
"in many cases good advice will put the consumer in a better position because they have a much better understanding of the financial situation, and what they have to do to improve it over time." In other words, help your clients understand their goals and objectives and the impact their current lifestyle is having on their short and long term goals and objectives. Sounds like financial planning 101 to me!!!! If you are worried about the closed APL - get out of the aligned dealer groups!