ASIC has released consultation papers containing proposed guidance for two aspects of the Future of Financial Advice (FOFA) reforms – Consultation Paper 182 Future of financial advice: Best interests duty and related obligations – Update to RG 175 (CP 182) and Consultation Paper 183 Giving information, general advice and scaled advice (CP 183)).
ASIC’s proposed guidance on the best interests duty covers the following areas:
- acting in the best interests of the client
- satisfying the ‘safe harbour’ for the best interests duty – including providing guidance on each element of the safe harbour providing appropriate personal advice; and
- prioritising the interests of the client.
The proposed guidance is in the form of an update to Regulatory Guide 175 Licensing: Financial product advisers—conduct and disclosure (RG 175).
The best interests duty obligations commence on 1 July 2013. Advice providers can choose to follow the requirements earlier. If they do so, they must register with ASIC.
ASIC’s proposed guidance on scaled advice will apply to all industry sectors, including super, financial planners, and banks and insurers, and includes practical guidance and examples about giving scaled personal advice, as well as practical examples about giving factual information and general advice to clients.
ASIC’s proposed guidance in this area indicates:
- All advice is scaled to some extent – advice is either less complex or more complex along a continuous spectrum (i.e. there are not two categories of advice ‘scaled’ and ‘holistic’).
- In general, the same rules, including the best interests duty, apply to all personal advice, regardless of the scope.
- It is possible to provide less complex advice in a way that is consistent with the best interests duty and the law generally.
