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ASIC Power to Ban Planners or Fines up to $1m for Corporations

By: admin|

In an effort to encourage more Australians to seek help via financial advisors the following requirements have now been  added under the Australian “Future of Financial Advice “(FOFA) regulations adding to the financial advisors roles and
responsibilities, as follows;
Advisors required to act in the clients best interest in addition to duty of care

  • Refrain from offering advice if they lack
    expertise in the area of discussions and walk away where required
  • Have clients sign an opt in contract every two
    years, to enable the advisor to continue to service the clients and charge the
    fee for service- Failure to do this will enable the clients to cease to pay the
    fees and demand a refund of the fees paid
  • Advisor must stop advising investors if they
    cannot provide them with a suitable solution or product and also identify if
    the client should seek further advice about another topic an example may be say
    Self Managed Superannuation Fund for which the particular planner is not
    authorised to advise on. Penalties of $250K for advisors and or $1M for
    corporate entities
  • Penalties of up to $1m for not complying with
    the new regulations
  • Advisors must be able to clearly identify they fully investigated a range of products which could meet the clients objectives.
    This may require the advisors to go beyond his dealer licence approved list.
    This of course will raise many issues and one in particular is the Professional Indemnity Insurance, as it’s outside the licences approved list.
  • Advisors must fully explain the advantages and disadvantages of taking out a product that the advisor is recommending to meet the client’s needs
  • Timing to coincide with the introduction of the scaled or limited advice models that focus on a specific product or service.
  • Ban on Group Life insurance inside insurance
  • Restrictions on the use of the term “Financial Advisor”
  • Extension on the ban on soft- dollar benefits

Following the release of the above ASIC will then address the following matters;

  • Replacement on Accountants exemption
  • When gearing is used ban on asset based fees
  • Details on intra- fund advice
  • Conflict on payments re commissions and payments

The big question is will these then extend across the other professions ASIC is currently in the process of bringing under their control. I cannot see why they would not be, as at the end of the day ASIC is just recognising more products and services and is requiring a structured process to the selling of the recognised products and advice given.


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