Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
“A lot is at stake”: Thousands of advisers risk deregistration in February
Almost 6,000 financial advisers will not be able to legally provide financial advice from the start of February unless their licensee registers them with the Australian Securities and Investment Commission before then.
A staggering amount of advisers have not been registered to provide personal advice to retail clients – a new requirement stemming from the Hayne Royal Commission’s Better Advice Act (2021) – despite there being less than two weeks before the cutoff date.
The new requirement is separate from the existing requirement for Australian Financial Services licensees to authorise advisers on ASIC’s Financial Adviser Registry (FAR). Originally slated to be a requirement back in April 2022, the new rule was pushed back almost two years after delays getting it through parliament.
If advisers were registered with the Tax Practitioners Board at the end of 2021, they are already deemed to be registered by ASIC by dint of the fact they had already paid associated fees and initially assessed as fit to practice by the board. However, if the adviser has switched licensees since then, the deeming is void and they must register.
According to ASIC, while the licensee is responsible for registering advisers, both the licensee and the financial adviser are responsible for making sure unregistered advisers do not provide financial advice once the cutoff date has passed. The consequences for doing so, ASIC detailed in an explanatory note, could be dire.
“If a relevant provider gives personal advice while unregistered from 1 February 2024, the relevant provider will be in breach of a restricted civil penalty provision and may be subject to regulatory action,” the note states.
“The relevant provider’s authorising AFS licensee(s) will have committed an offence of strict liability and contravened a civil penalty provision. The AFS licensee(s) may be subject to regulatory action if they continue to authorise the relevant provider at the time they provide the advice.”
Financial Advice Association Australia CEO Sarah Abood (pictured) warned advisers and licensee against putting off registration any further, while noting that many are only trickling back into the office after summer holidays.
“While there have been a number of communications about this new obligation, we are aware that many licensee staff and advisers have been on leave recently and thus not yet attended to this matter,” Abood said.
“Completing this process by 1 February 2024 is essential in order for advisers to continue to practice,” she added. “A lot is at stake.”
Ed’s note: As of January 18, ASIC has provided an extension on the cut-off date for adviser registration to February 16.
