In its response to the Australian Law Reform Commission’s (ALRC) Interim Report B into financial services legislation, the Financial Planning Association (FPA) has thrown its support behind the ALRC’s proposed legislative hierarchy, noting that it has the potential to “significantly simplify” the navigation of corporations and financial services legal requirements for all users.
The FPA argued that financial planners studying for the financial adviser exam have been hindered in their efforts to navigate the relevant laws and regulations due to the “historical layering of regulatory reforms on top of existing obligations”.
As such, the FPA is advocating for the separation of the legal obligations placed on the individual financial planner practitioner from the requirements that apply to the Australian Financial Services (AFS) licensee and product provider.
“Financial advice provisions should be clearly separated for relevant providers and AFS licensees, either in separate rulebooks or distinct chapters within a combined Financial Advice Rulebook,” the group wrote.
It proposed the following:
According to the FPA, there should be dedicated sections that allow all users to easily find all the responsibilities of the:
- AFSL holder
- Individual professional practitioner
- Regulator
- Single Disciplinary Body (financial services and credit panel)
- Australian Financial Complaints Authority
- Product provider
“This would help planners to be able to understand the obligations licensees are responsible for, versus the requirements that they, as practitioners, are responsible for, and vice versa,” the group argued.
Importantly, it said, there must be clear delineations of responsibilities between financial planners and the obligations that product providers are responsible for.
“Consumers should also be able to differentiate between responsible parties more clearly, particularly in relation to services provided by financial planners and product providers.”
Moreover, the FPA judged that the current state of the financial advice regulatory environment made it appropriate for prioritisation in transitioning to the proposed legislative hierarchy.
“As noted by this review and many others, the current regulatory environment for the provision of financial advice is excessively complex,” it said, while also drawing attention to “significant duplication” of the obligations within the Corporations Act that exacerbates this complexity and regulatory burden.
“Given the concurrent Quality of Advice Review (QAR) being undertaken by Michelle Levy, consideration should be given to the implementation of the recommendations stemming from the QAR within the ALRC’s final report,” the FPA noted.
