Advisers to offer credit services under new proposal

In its draft report on competition in the Australian financial system, the Productivity Commission noted that financial advisers must also seek licensing under the separate credit licensing regime in order to provide advice on credit facilities.

“Some view this as a duplication of regulatory requirements, although ASIC has provided guidance to avoid duplicating processes,” the draft report said.

“The separate regulation and processes appear to be an historical legacy, restricting the flow and potentially the quality of information available to consumers when they seek financial advice from an adviser.”

The draft report proposes changing the current licensing regime to permit advisers to provide clients with advice on “some credit facilities”, arguing that doing so will increase competitiveness in the credit space and providing clients with a better advice experience.

“The benefits of having a single or hybrid licence would appear, at least on first principles, to allow greater flexibility of service provision, overcoming the need for two licences,” the draft report said.

“There would also be benefits to consumers receiving more holistic advice in one professional relationship.”

Advisers’ best interests duty could then also extend to credit products, the draft report said, meaning the possibility of further benefits to the end client.

“[Consumer advocacy group] CHOICE provided a comparison of the regulatory obligations of mortgage brokers with financial advisers, concluding that ‘brokers are being held to a relatively low standard’,” the report said.