The Financial Planning Association (FPA) is arguing that “considerable further work is necessary” on proposed regulatory changes to the Financial Services Reform Act (FSR), which have the potential to create a new category of “product sellers” separate from financial advisers.
The FPA submission, filed with Treasury this week, specifically expressed concern at the proposal to separate superannuation-related advice from the mix.
FPA chief executive Jo-Anne Bloch said while her organisation supported the intent of the proposed changes, it had concerns relating to both the introduction of a new sales recommendation category, and a proposed materiality threshold of $10,000.
She said the sales recommendation category had the potential to confuse consumers and increase the compliance burden on financial planners, while the proposed materiality threshold of $10,000 was too low because most clients seeking advice would have more than $10,000 and a range of needs, which included advice on superannuation.
Bloch said the proposal to separate out superannuation from both proposals would risk severely restricting the provision of holistic advice and create a costly dual compliance regime.
“The FPA supports the Government’s intention to give consumers clarity about the capacity in which a financial adviser is acting — as a professional adviser working in the client’s interests, or a salesperson who is not required to consider a client’s need,” she said.
“However, we have real concerns that the proposal to create a ‘sales’ category in its present form could substantially alter the structure of the regulatory regime and weaken consumer protection under FSR,” Bloch said. “We are not confident that consumers will be able to differentiate between a sales recommendation and advice and realise that responsibility in choosing a particular product will be almost entirely theirs.”
