The term “financial planner/adviser” needs to be defined by legislation in order to - among other things - stamp out product pushers who sully the name, says the Financial Planning Association (FPA).
It published this request as part of its submission to the Senate Economics Committee inquiry into the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014.
The committee will present its final report to the senate on 16 June.
“The term financial planner/adviser should be defined by legislation in order to prevent individuals who offer financial product information/factual information from representing themselves as financial planner or financial advisers,” the FPA recommended.
It made this suggestion as part of a series of comments about the proposed exemption of general advice from the ban on conflicted remuneration.
FPA’s general manager of policy and government relations, Dante De Gori, told Wealth Professional
that legislating the use of the term “financial adviser” was an important in the quest towards consumer confidence.
“Half of the debate has been around the fact that consumers don’t know the difference between general advice and personal advice, and to help that confusion there should be legal boundaries,” he said. “One of the problems is that as soon as someone does something wrong, it tarnishes the whole industry – whether or not that person was a financial adviser.”
The FPA also suggest the legislation of the term is linked to the membership of a professional body so that the consumer is assured the adviser is upheld through professional standards.
In the submission it said that while it strongly opposes any possible re-introduction of commissions for financial product advice on superannuation and investment products, it acknowledges that there have also been unintended consequences of the FoFA reforms for general advice providers.
“Providing product information to customers does serve a purpose in educating and engaging consumers, especially if that information helps consumers to understand the value of seeking advice,” the submission said.
The FPA recognises that the current Bill reflects amendments to the exposure draft which limit the availability of conflicted remuneration to employees of licensees therefore explicitly excluding financial planners who operate as authorised representatives.
However, it recommends further amendments in order to stay true to the policy intent of FoFA.
As well as defining the term “financial planner” in legislation, the other recommendations include banning sales commissions with respect to financial product advise on superannuation and investment products, re-terming general advice as “factual information” or “financial product information” rather than financial product advice, and regulating this information with a warning similar to the general advice warning.
“The FPA recommends that the committee engages in close consultation with stakeholders on changes to general advice terminology and definition,” the submission said.
This latest set of submissions to the Senate Economics Committee reflects increasingly polar views from a variety of interested parties.
While groups such as the Financial Services Council (FSC), the Association of Financial Advisers (AFA), and two of the Big Four – Commonwealth Bank and Westpac – are particularly supportive of the proposal to remove the “catch all” provision from the best interests duty, others such as Industry Super Australia (ISA), vehemently disagree.
“Its deletion deprives a provider of advice of any legislative guidance as to the level of conduct against which their conduct will be judged,” the ISA submission said. “The changes contained in the Bill risk entrenching systemic underperformance of retail superannuation assets with long-term impacts on age pension expenditures.”