Fine balance for new code

The Code Working Group has been told by many people that is proposals for adviser competence standards were not right – but no one has yet offered a better solution, its chairman says.

Monday, July 2nd 2018, 6:00AM

Angus Dale-Jones spoke at the Financial Markets Law conference last week.

He said the code would need to set out competence standards that would apply in a range of advice situations – but how to apply a distinction was hard to get right.

It was likely that a different approach would be taken to the code’s initial suggestion of a differentiation between product advice and financial planning.

“We need to do some more thinking… people have very eloquently pointed out what doesn’t work about what we suggested but people who submitted are struggling to come up with a suggestion on how we make that distinction.”

Dale-Jones said it was unlikely that the new code would vary greatly from the existing one in its principles, but there would be significant changes in how those principles could be evidenced.

The Financial Services Legislation Amendment Bill brings in a model that focuses more on the entity advisers work for, rather than individual advisers themselves, as in the Financial Advisers Act regime.

Dale-Jones said the working group had had strong feedback that people wanted to know that licensing would be straightforward.

The new regime would be a hybrid with a focus on entities and some individual responsibilities.

“There are elements of individual professionalism still retained in the legislation – the importance of the person is still there, it gives us superior legislation to the legislation that Australia has worked with for years. Australia has recognised the limitations it has in not having individual focus and we are retaining bits of that.”

Advisers thinking about how to structure their business would need to know that the focus would be on who was taking responsibility. The financial liability for things going wrong would rest with the licensed financial advice provider, he, said, but disciplinary liability to follow out duties in the code rested with the financial adviser.

The code would need to be open to a range of business models, he said. It needed to strike the right balance between offering too many obligations for call centre staff who were simply selling a product with a recommendation, and full service financial planners who needed the definition of advice to be upheld.

“The fewer places where we have dividing lines, the lower the opportunity is for regulatory arbitrage. We are trying to create a regime where there is consistency of what customers expect and doesn’t incentivise people to give lesser service to a customer. The code at its heart is making a world that is attractive to customers so the customer has an appetite to get advice but at the same time the business has an appetite to give advice.”

Tags: Angus Dale-Jones Code Working Group