Sovereign warns its advisers against complacency

New draft legislation released today by the Commerce Select Committee, which is responsible for the Financial Advisers (Pre-Implementation) Bill, will give some financial advisers the option to operate under a slightly less stringent regulatory model.

Under the proposed changes to the Financial Advisers Act, advisers who deal solely in Category 2 financial products - which include residential mortgages and term insurance - will be able to take a step down in their industry registration status.

Previously, many of these advisers were required to be Authorised Financial Advisers (AFA) due to the broad interpretation of Financial Planning Service. This meant they were subject to a Code of Professional Conduct which outlines minimum standards of ethical behavour, client care, competency, knowledge and skill.

Under the new legislation they may only need to be Registered Financial Advisers (RFA). This means they cannot offer services except in respect of Category 2 products and are not technically subject to the Code of Conduct (although this might change in future).  However, minimum standards of ethical behavour, client care, competency, knowledge and skill are still required.