The rules around the provision of scaled advice should not be watered down just because the banks have difficulty in dealing with them, according to a submission by both Industry Super Australia (ISA) and the Australian Institute of Superannuation Trustees (AIST).
In joint submission to the Government’s Future of Financial Advice (FOFA) Post-Implementation Process, the ISA and AIST pointed to the importance of scaled advice and that one of the objectives of the FOFA reforms had been to facilitate access for retail clients to financial product advice, including 'scaled' advice.
“At the time of its introduction it was widely accepted that one of the main reasons more people do not seek financial advice, is that too often it does not seem worth the costs to see a planner about a single, relatively simple financial issue,” it said.
The ISA/AIST submission noted that the Treasury consultation paper underpinning the FOFA post-implementation review had stated “there is considerable uncertainty around whether ADIs [banks] can remain compliant with the best interests duty and still provide scaled advice”.
“This appears to be a poor attempt to water down conduct requirements,” the submission said.
“It is vitally important that as an industry we do not lower conduct requirements, merely because it is seen as ‘inconvenient’ by some quarters. This is more so, when some major financial institutions have been the subject of significant condemnation for poor consumer practices,” it said.
“One of the fundamental goals of the FOFA reforms has been to produce a uniform approach to the provision of high quality advice. As such, scaled advice is subject to the same legal requirements as advice that is fully comprehensive and this should not change.”
The submission said that as far as the AIST and ISA were aware scaled advice had been a success in the superannuation industry, and some funds were reporting an increase in up take by up to 33 per cent since its introduction.
“The chosen option of inserting a note into the Corporations Act stating that the best interests duty anticipates the use of scaled advice has met its objective,” it said.