30/08/2011

In April this year ASIC issued Consultation Paper 153 (CP 153) outlining a proposed new financial adviser licencing framework for industry feedback and comment. ASIC is scheduled to release Regulatory Guidelines on adviser training requirements in August this year.

Here we recap what was proposed in CP 153 and summarise some of the issues raised by various financial services industry groups in their feedback.

In CP 153 ASIC proposed a regime with three stages as follows:

1. Adviser certification: a compulsory national exam for all advisers providing personal or general advice on Tier 1 products to retail clients.
2. Monitoring and Supervision: new advisers must be supervised for 12 months by a supervisor who has at least 5 years relevant experience.
3. Knowledge update review: a compulsory online examination within two years of passing the adviser certification exam, and then every three years thereafter.

The proposed framework is intended to enhance and maintain the competence of financial advisers, lead to improvements in the quality of advice and increase consumer confidence, especially in light of the collapse of financial service and product providers including Storm Financial and Opes Prime.

Providers of personal and general advice would be required to sit the national exam if they advise on Tier 1 products to retail clients. Personal advice is financial product advice that is given or directed to a person in circumstances where the adviser has considered the person’s objectives, financial situation or needs.  General advice is other financial product advice that is not personal advice, eg general product information that is not directed to a particular person. Tier 1 products are all financial products except those listed as Tier 2, namely all financial products except general insurance products (except personal sickness and accident), consumer credit insurance, basic deposit products, non-cash payment products and First Home Saver Accounts.

Comments from various industry bodies have focussed on questioning the merits of the proposed regime around the following issues:

1. Whether expansion of the framework to employees who provide only general advice creates an unreasonable compliance and cost burden on the industry.
2. The need to consider factors other than experience for supervision of new advisers, eg qualifications and the position held by the supervisor.
3. The value of creating a national register of advisers in the public domain.
4. Providing a system for recognition of prior qualifications and experience.
5. Introducing a more rigorous Continuing Professional Development scheme with mandatory components for certain essential aspects like ethics, skills assessment, communication and compliance.
6. Supervision and monitoring to be more flexible to suit different advice delivery methods, eg for call centres and face to face advice.
7. Differentiation of the training for advisers servicing retail and wholesale clients.

We look forward to seeing ASIC’s new Regulatory Guidelines in view of these industry comments.

If you have any questions in regard to this article, please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.