ASIC’s ‘inconsistent approach’ an impediment to scaled advice
An industry association has told ASIC that its inconsistent approach to issuing policy guidance and undertaking advice reviews is leading to uncertainty around the provision of scaled advice.
In a submission to ASIC’s consultation on promoting affordable advice for consumers, the Stockbrokers and Financial Advisers Association (SAFAA) has listed ASIC’s own inconsistent approach to scaled advice as having a significant impact on the ability of its members to provide quality, affordable, scaled advice to consumers.
SAFAA noted that ASIC Consultation Paper 332 states that there is a great deal of uncertainty that remains regarding the provision of scaled advice in Australia.
“SAFAA considers that a cause of this uncertainty is ASIC’s inconsistent approach when issuing policy guidance and undertaking advice reviews,” the submission stated.
“It has come to our attention that at the same time ASIC is looking to encourage the implementation of scaled advice, our members have received reports from ASIC relating to personal advice reviews conducted by it in 2018 and 2019 that conflict with the law on scaled advice.”
The reports, it said, relate to surveillance ASIC conducted on the retail financial advice business of eight AFS licensees who are ASX market participants.
The purpose of the reviews, SAFAA explained, was to understand the participants’ advice businesses, to the extent it involved the provision of investment-related personal advice to retail clients.
An area of focus, it said, was the steps the participants had taken to comply with their obligations under chapter 7 of the Corporations Act regarding the provision of that advice.
“The ASIC reports that we have viewed cause us considerable concern about ASIC’s approach to the provision of scaled advice to stockbroking clients, and, in particular, the level of enquiries ASIC asserts stockbrokers must make and the records that are required to be maintained to comply with the Corporations Act provisions on scaled advice,” the submission stated.
“Worryingly, the reports we have viewed do not take the scaled advice model into account, but presume that each client should receive a full advice service when this is not the case.”
SAFAA said it has been advised that most of the files reviewed by ASIC related to clients seeking transactional advice concerning stockbroking services where there was no need to undertake the depth of enquiry, provide the level of detail in disclosure documents or maintain the level of detail in client files or order records that ASIC stated in the reports as being necessary.
One of the recommendations made by ASIC in one of the reports, according to SAFAA, was that brokers should communicate to advisers not to assume “that clients are seeking scaled or limited advice about market traded securities, nor that the advice being sought by the client matches the adviser’s service offering”.
“We consider that this view conflicts with the provision of limited advice and evidences a complete misunderstanding of stockbroking and how stockbrokers provide limited advice. There is an assumption that stockbrokers must provide full-scale financial planning-style advice and conduct a full fact-find,” the submission stated.
“There is also an assumption that clients who contact their stockbroker for advice do not understand the services they are receiving, notwithstanding the disclosure stockbrokers are required to make to clients before providing services to them and the complete lack of any evidence by ASIC that customers of stockbrokers are in fact confused.”
SAFAA said the fact that ASIC is seeking feedback was a positive step, with the availability of good-quality advice increasingly important.
“Our overarching recommendation is that the government and regulators need to move away from a ‘one-size-fits-all’ approach to the provision of personal advice to retail clients,” it said.
“Consumers want different advice for different needs and the regulatory environment needs to accommodate consumer preferences and requirements and not seek to shoehorn all consumers into one advice service.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.