ASIC consults on FOFA reforms
ASIC has released consultation papers containing proposed guidance for two aspects of the Future of Financial Advice (FOFA) reforms – scaled advice and the best interests duty.
The work seeks to promote confident and informed investors and financial consumers, noting the value good financial advice can provide to consumers in helping them make important financial decisions.
ASIC Chairman, Greg Medcraft, said: ‘FOFA contains significant reforms intended to bring about real changes in the way financial advice is provided. These measures aim to improve the standard of adviser conduct and improve engagement by retail clients with advisers and advice.’
ASIC’s proposed guidance on the best interests duty covers the following areas:
- acting in the best interests of the client
- satisfying the ‘safe harbour’ for the best interests duty – including providing guidance on each element of the safe harbour
- providing appropriate personal advice; and
- prioritising the interests of the client.
The proposed guidance is in the form of an update to Regulatory Guide 175 Licensing: Financial product advisers—conduct and disclosure (RG 175).
ASIC’s proposed guidance on scaled advice will apply to all industry sectors, including super, financial planners, and banks and insurers, and includes practical guidance and examples about giving scaled personal advice, as well as practical examples about giving factual information and general advice to clients.
ASIC’s proposed guidance in this area indicates:
- All advice is scaled to some extent – advice is either less complex or more complex along a continuous spectrum (i.e. there are not two categories of advice ‘scaled’ and ‘holistic’).
- In general, the same rules, including the best interests duty, apply to all personal advice, regardless of the scope.
- It is possible to provide less complex advice in a way that is consistent with the best interests duty and the law generally.
The best interests duty obligations commence on 1 July 2013. Advice providers can choose to follow the requirements earlier. If they do so, they must register with ASIC.
ASIC has undertaken a consultative approach in developing the scaled advice and the best interests duty guidance, consistent with our normal approach in relation to the implementation of law reform.
Submissions to CP 182 and CP 183 close on 20 September 2012.