Expand reference checking to management: FPA

The proposed ASIC regulatory guidance in CP333 will implement a royal commission recommendation, mandating AFSLs share background information about the advisers they employ, who are authorised to give personal advice.

AFSLs will be required to comply with the ASIC protocol, with the regulator aiming for a consistent practice across practices.

But the Financial Planning Association has pushed for the standard to also include providers of general advice as well as firms’ management and directors.

FPA chief executive Dante De Gori commented the body has supported the reference checking protocol for a number of years.

The FPA has offered its own reference checking service for longer than a decade, which used the ABA reference checking protocol that preceded the current reforms on the table.

“However, the FPA is still concerned that unprofessional and unethical participants in the financial planning profession can continue to influence detrimental consumer outcomes by being allowed to move into management roles without appropriate and mandatory reference checks being conducted,” Mr De Gori said.

“For this reason we continue to recommend that ASIC extend the law to directors, management and responsible management roles without appropriate and mandatory reference checks being conducted. For this reason we continue to recommend that ASIC extend the law to directors, management and responsible managers and not just advice providers.”

The association’s chief added he was “confused” as to why ASIC was not creating a central register similar to the referee register maintained by the ABA.

The ABA protocol was introduced in 2016, with the aim of improving reference checking for advisers. It has set minimum standards for the licensees that subscribe to it, including obligations for reciprocal information checking, a standard process and time frames for providing references and information, certain reference checking questions and record keeping obligations.

But a limited number of AFSLs subscribe to the ABA protocol.

The FPA has called for ASIC to roll out a single register of designated referee details as opposed to the current plan of having individual referee contact details dispersed between licensee websites or “other arrangements” as described in the draft standard.

“The proposed process is laborious because it requires the new licensee to manually search through multiple web pages as part of the reference checking process,” Mr De Gori said.

“It’s an inefficient regulation of a critical consumer protection policy.”

Other recommendations from the body include allowing advisers to contest false information given by licensees and including references to the Privacy Act.

“We look forward to continuing discussions with the government and regulators on the issues most critical to our members,” Mr De Gori said.

“We strongly encourage our members to keep sharing their feedback on what further support they need so we can continue to build a thriving profession.”