General advice loophole requires ‘IFA’ redefinition

In a submission to the FOFA Senate inquiry, the Boutique Financial Planners industry body – a sub-group of the FPA representing self-licensed firms of less than 20 authorised reps – called for a more sensible approach to the legal definition of the restricted term “independent”.

“While not in favour of any re-introduction of commission payments for investment and superannuation product sales, if it is to occur, it must be linked to the introduction of a workable legislative definition of independent financial advice so that consumers can properly identify whether they are dealing with an employee or agent of a financial product manufacturer or with a non-aligned professional financial planner,” said the submission, penned by BFP president Wayne Roggero.

“The BFP has always believed that the FSR regime introduced in 2004 contained a structural flaw in allowing financial product manufacturers (banks, insurers and super funds) to “dress up” the provision of information regarding their products, and the selling of their products by employees, agents, or authorised representatives licensed through AFSLs owned by them, as ‘advice’,” the submission reads.

The lobby group states it will not support the proposed exemption unless there are additional amendments to ensure that licensee ownership is “fully disclosed” on all marketing materials – as was the norm pre-FSR – and/or a “clear distinction” is made between “financial product sales people” – in which the BFP includes “representatives of AFSLs owned by product manufacturers” – and “non-aligned, independently-owned financial advisory businesses”.