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What’s changing in Financial Advice?

Tuesday 15 May 2018

Regulation


With the formulation of an industry body set to develop codes of conduct and take responsibility for the establishment of guidelines for education, expectation is high for financial adviser’s promises to improve the quality of advice clients.
 
Nicole Chew, Senior Lawyer for the Financial Adviser’s Team at ASIC, Sydney, spoke about the changes for the financial advisers at the Market Integrity Liaison Meeting, last week.
 
The first thing Chew addressed was the professional standard for financial advice, indicating the reforms affect neither general nor personal advice on basic banking products, consumer credit insurance and general insurance.
 
However, the new educational requirements mean all financial advisers must now hold the relevant bachelor’s qualifications, pass an annual exam to meet continual professional development requirements, and comply with the code of ethics.
 
New entrants to the industry will have to complete a year of supervised work and training prior to giving personal advice, and this requirement will come to effect next year.
 
“For existing advisers, they all have until 1 January 2021 to pass the exam and until 1 January 2024 to meet the professional requirements,” Chew said. 


 
Co-regulatory model

Chew also addressed the role of the Financial Adviser Standards and Ethics Authority (FASEA) that will be responsible for approving the education programs and exams, setting the CPD requirements, developing the code of ethics, and setting the requirements for the new entrants to the sector.
 
The conduct regulator will continue to monitor compliance with the existing code of ethics, and will still be responsible for RG 146, which will cover the training standard related to general advice on financial products.
 
The regulator is also responsible for the financial adviser’s register, which will be updated as part of the reforms and will provide information on financial advisers.
 
Chew said RG 146 will ensure advisers benefit as a result of transitioning to meet the new requirements.
 
When it comes to compliance schemes, Chew indicated that the legislation becomes a bit more complicated.
 
“The reforms contemplate the co-regulatory model, so there will be monitoring bodies who have compliance schemes, and these compliance schemes govern how the monitoring body will monitor, investigate and enforce compliance and the new codes of ethics.”
 
The only restriction Chew identified is that the monitoring body can’t be a licensee or associated with a licensee.
 
While the regulator has the responsibility of approving the compliance scheme, however, they will not oversee the monitoring body.
 
Industry can expect a consultation paper on how ASIC will monitor the compliance schemes, and Chew said the corporations’ regulator will have expectations in this area.
 
“We will be looking for well-resourced compliance schemes to strongly withhold compliance with the code,” she said.

 

Financial Adviser Registration
Chew told attendees that the professional standard required new information to be collected from financial advisers and this data needs to be provided to the regulator.
 
This means looking at what compliance scheme covers the financial adviser’s principal place of business, in addition to any other new data that may need to be provided for the provision of financial advisers.

 

Changes coming in RG 146

ASIC will be looking to update its guidance in relation to this regulatory guideline; however, they will be looking at the ASIC training register at the same time, and Chew noted they did not expect to start on this until the next financial year.