The industry watchdog’s proposal to remove the class order relief for superannuation funds providing scaled advice has been met with support from the Industry Super Network, but there are still some unknown consequences for super funds.
The Australian Securities and Investment Commission (ASIC) released consultation paper 164 (CP164) Additional guidance on how to scale advice, which includes the proposal to revoke the class order exemption for superannuation funds.
The document also provides expanded direction on the provision of scaled advice, including an outline of the difference between factual information, general advice and personal advice. This explanation would be included in a new regulatory guide (RG), which would replace the existing RG 200.
Superannuation trustees and their authorised representatives currently have a class order exemption from the requirements of the so-called ‘suitability rule’, Corporations Act clause s945A, where a financial planner is required to know their client, know their product and ensure advice is appropriate.
However, under the new proposal, financial planners and super funds providing scaled advice services would need to comply with obligations under Chapter 7 of the Corporations Act and to the suitability rule.
It is also unclear as to the impact this increased liability will have on superannuation funds providing advice online, as well as the licensing requirements for providing scaled advice.
In the consultation paper, ASIC pointed out that it was not yet clear whether the proposed Future of Financial Advice (FOFA) reforms would be introduced in their current form, and made no comment on their implications on scaled advice.
If and when the FOFA reforms are implemented, ASIC said it would review the updated guidance.
Submissions to CP164 will close on 8 September 2011.
