Restricted advice label a ‘band-aid’

Speaking at the Boutique Financial Planners' annual conference in Brisbane this week, FPA general manager for policy and conduct Dante De Gori poured cold water on ASIC’s proposal for a UK-style ‘restricted’ advice category, citing the need to review the definition of independence.

In its second submission to the Financial System Inquiry, ASIC proposed that institutionally-aligned advisers be labelled as ‘restricted’ in order to safeguard consumers from the “inherent conflicts of interest” within vertical integration.

“My concern is that we’re just adding another band-aid to the problem,” Mr De Gori said.

Firstly, ‘financial product advice’ as it is defined in the Corporations Act should be questioned, he said.

Second, before the government considers introducing a ‘restricted’ category, the Corporations Act definition of ‘independence’ when it comes to financial advice should be reviewed, Mr De Gori said.

“Is it still fit for purpose today? Why aren’t we looking at that first?” he asked.

Mr De Gori said he was also concerned about the “negative connotation” associated with the word ‘restricted’.

“And in the UK, those advisers that weren’t restricted have to broker the whole market,” he said.

“So if you’re [an IFA] in the UK, you have an obligation to broker the whole market when you provide advice. What would be the implication of [that in Australia]?”

FPA chief executive Mark Rantall previously told ifa that the association was yet to formulate its policy response to ASIC’s submission but that his initial reaction was that the proposal may go “too far”.