People who want to call themselves financial advisers or financial planners will need to meet strict legal requirements, according to new draft legislation.
The FPA has welcomed the move, stating that currently under the Corporations Act there is no constraint on individuals calling themselves financial planners – irrespective of their training, competence, and even licensing.
“This is a fundamental public confidence issue,” said FPA CEO Mark Rantall. “Only one in five Australians currently get financial advice and some of this is due to consumers not knowing who to trust.
“Consumers deserve the right to differentiate between a qualified, professional financial planner and anyone who happens to hang out a shingle calling themselves a financial planner. The FPA has long called for ‘truth in labelling’ and this draft legislation from the government responds to those calls.”
“There are those in the industry who call themselves financial planners but are seemingly unaware of the specific competency, training, licence, professional standing and services provided. This legislation should put a stop to those bad apples who have misled the Australian public and tarnished the profession by wrongly using this title.”
The draft legislation states that only those fully licensed and authorised to provide personal financial advice can call themselves a financial planner or financial adviser.
“This is a great win for consumers and strengthens the benefits of the FoFA reforms, in particular the introduction of best interest and the removal of conflicted remuneration,” said Rantall.
The FPA had proposed that those individuals calling themselves financial planners should also be a member of a professional association, but the draft legislation does not include this stipulation.
“Membership of a professional body, like the FPA, provides additional safeguards to consumers in terms of the professional integrity and accountability of their financial planner. Though, this is a significant first step the FPA will continue to advocate for membership of a professional body and/or an ASIC approved code as the ultimate criteria for restricting the term financial planner/adviser,” said Rantall.
On announcing the new draft legislation, Minister for Financial Services and Superannuation Bill Shorten stated that it “improves the growth prospects for the estimated 18,000 advisers and planners currently practicing”.
“The gift of longer life means it’s in the national interest to ensure consumers have confidence in financial planners and advisers,” he added.
“The Gillard Government recognises the need for quality financial advice, and for Australian consumers to have trust and confidence in their financial planners and advisers, is critical. This measure will ensure that only persons authorised to give personal financial advice to retail clients can hold themselves out to be a ‘financial adviser’ and ‘financial planner’ – or use terms of like meaning.”
He added that the measure will help to protect consumers from product spruikers who might falsely claim to be authorised financial advisers.
The AFA too have come out in support of the draft legislation, noting that the move was good for consumers who will have the confidence to know that the people they seek advice from are genuine financial advisers/planners.
“This will go a long way towards protecting consumers from unlicensed operators who have until now been able to call themselves financial advisers,” said AFA CEO Richard Klipin. “Consumers will now know that the people they seek advice from are genuine financial advisers, who are licensed or authorised to provide financial product advice.”
AFA president Michael Nowak added that the proposed legislation is a win for the industry. “It is a particularly good outcome for the financial advice industry,” he said. “Advisers can now use the term ‘financial adviser’, confident in the knowledge that consumers will understand that they are licensed or authorised to provide financial product advice.”
Click here to see the draft regulations and draft explanatory statement. Submissions on the draft regulations close on 21 December.