Principles approach to FAA review likely

Advice accessibility and suitability, as well as issues of conflict of interest, are likely to be top of the list to address as the Financial Advisers Act is put up for review, a regulation expert says.

Friday, February 27th 2015, 6:00AM

by Susan Edmunds

Angus Dale-Jones is a PAA board member and compliance strategy consultant.

The FAA review starts this year and the terms of reference are expected next month. An issues paper is expected for public consultation in May.

Dale-Jones said he would be surprised if early documentation provided a list of specific topics to address. Instead, he expected a focus on the principles of the original legislation.

One would likely be the question of accessibility.

But he said boosting access to advice would come with a trade-off because the regulators would have to gauge to what extent they could dispense with bureaucratic requirements to maximise advice efficiency.

The question of limited advice had not been dealt with well, Dale-Jones said. “We need to open the debate and talk about how to get it working in a more nuanced way so it works with what people would expect of a mature profession.”

He cited medicine as an example to compare it to. A patient who went to the GP wanting a solution for a sore knee would not get a complete medical check-up, that profession’s equivalent of a full financial plan.

“But it’s implicit that the suitability [of the doctor’s advice] has been taken into account. They’ll have their antenna up and if something is apparent about your health that prompts the GP to look more broadly, that’s built in. The financial advice profession has become so black and white that it’s either complete financial advice or it’s the other end, class advice, not taking responsibility.”

Conflicts of interest would likely be looked at, Dale-Jones said, including the question of commissions. “Commission has go to come up because it’s the flipside of accessibility.”

But he said there were a number of situations where conflicts could arise that would have to be considered, whether that was in the case of independent advisers, aligned advisers or even roboadvice.

Qualification standards might also be up for debate. Dale-Jones said there would have to be a balance struck between initial entry qualifications and the ongoing CPD requirements. It should also be recognised that interpersonal skills were important for advisers, he said. “You want a balance between technical and relationship skills and pushing out the entry level qualification doesn’t do that.”

Dale-Jones said the industry needed to remember that MBIE’s goal was to promote financial advice, not regulate advisers away. He said an 18-month review timeline was appropriate because it would give the industry time to gauge MBIE’s thinking and engage thoroughly.

Tags: AFA Financial Advisers Act PAA