FPA calls for abolishment of adviser AFSL system

In a statement, FPA chief executive Dante De Gori said the association was calling for the AFSL system to be reformed to focus on the licensing of financial products rather than the provision of financial advice.

“While the AFSL system plays an important role in regulating financial products and services, recent reforms have focused the regulation of financial advice at the individual practitioner level,” Mr De Gori said.

“This is an appropriate approach and acknowledges the relationship between a client and their financial planner is a personal relationship, not one between an AFSL and the client. Future reforms to the regulation of financial advice should occur through the professional standards framework and rely on individual registration of financial planners.”

Mr De Gori said the AFSL system currently added unnecessary costs to the provision of advice and introduced potential conflicts between the views of the licensee and adviser.

The association said the establishment of a single disciplinary body for advisers would open the door to individual registration, and that it made sense for the body to also have responsibility over monitoring an adviser’s qualifications and exam status.

“This information should be provided by the individual financial planner and verified as correct by the single disciplinary body,” Mr De Gori said.

“In this manner, the register will become an authoritative source of information on each financial planner, including their qualifications, compliance with professional standards and disciplinary record.”

Mr De Gori said individual registration would have added benefits in obligating an adviser to take responsibility for their own qualifications and compliance with the FASEA professional standards.

"Registering with the single disciplinary body and maintaining accurate information on the register should be the individual responsibility of each financial planner, not their employer or licensee," he said.

"Information on the register relating to a financial planner should be verified by the single disciplinary body and represent an authorised record of whether a financial planner has complied with their professional standards."

Mr De Gori added that the association believed the current licensing system was inadequate because it focused on being licensed to provide advice around particular product types, which was not consistent with the modern direction of the advice profession.

"The regulation of financial advice is currently tied to the recommendation of a financial product, reflecting a history in which a product recommendation was the core component of most financial advice. In a professionalised financial planning sector, this is no longer the case," he said.

"Contemporary financial planning is about a lot more than recommending financial products. There is a wide variety of topics that might be covered by financial advice and many may not include a product recommendation. Regulation of financial advice should reflect the variety of advice that can be provided, and not continue to be tied to financial product recommendations.

"Future regulation of financial advice should focus on the broad nature of contemporary financial advice and not limit its focus to financial products. The law should be changed to separate the regulation of financial products from the regulation of financial advice."