Roy Keenan from Yarra Capital Management shares insights with James Dunn from The Inside Network on the role of active management. The Inside Adviser
After the Hayne Royal Commission many advisers decided to steer away from large dealer groups in favour of becoming self-licensed. In the last six months, however, that trend has taken an abrupt turn.
ASIC launches financial advice hub
These days, becoming a financial adviser is no easy feat. Following the banking and financial services Royal Commission, the bar was raised, with higher education and professional standards put in place to lift the education, training and ethical standards of financial advisers.
Financial advisers must be licensed (hold an AFSL) and new advisers must have a relevant bachelor’s degree or higher, pass an exam, have completed a professional year and meet ongoing continued professional development requirements.
ASIC, being the regulator of the financial advice industry, is the arbiter of truth when it comes to the sector and has recently begun a process of upgrading the tools and information available for those operating in the industry. This culminated in the official launch of the Financial Adviser Hub at asic.gov.au this week, with further additions to be made in the coming months.
The aim is for this to be a one-stop shop of relevant information, templates, guidance and the like, that assists advisers in navigating the labyrinth of compliance requirements that entangle the industry.
ASIC regulates both the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth), which oversee the conduct and disclosure obligations of financial services providers such as individual financial advisers and Australian financial services (AFS) licensees. The main focus is on the behaviour of financial advisers and their impact on consumers.
Following the Royal Commission, a raft of changes were recommended to ASIC in relation to the provision of financial advice. Some of the major changes were:
- A written consent that a fee recipient must obtain from a client before deducting, or arranging to deduct, advice fees from a client account as part of an ongoing fee arrangement
- End the payment of grandfathered conflicted remuneration ahead of the legal requirement to end these arrangements
- Pass previously grandfathered benefits on to product holders
- A reference-checking and information-sharing protocol for financial advisers and mortgage brokers
- Requirement to automatically report certain breaches to ASIC
- A new disciplinary body
Prior to these additions, the FOFA reforms in June 2012 were the most recent major change. ASIC says. “The amendments included extending the time period for giving opt-in notices and fee disclosure statements – from 30 days to 60 days after the relevant date.
As a financial adviser, it’s up to you to keep on top of the many regulatory amendments to ensure quality advice is given while adhering to the regulator’s long list of provisions. There are heavy penalties for advisers that breach them. New obligations require licensees to automatically report certain breaches to ASIC.
ASIC says it has a “a range of regulatory tools we can use when addressing misconduct involving financial advice. These are broadly grouped under three types of action: civil, criminal and administrative. We may use remedies in combination or standalone.”
For AFSL misconduct there are some serious consequences such as immediately suspending or cancelling an AFS licence in certain limited circumstances or issuing an infringement notice. “For providers of financial services, we may also take administrative action by banning that person from providing financial services, or controlling, or being an officer of a financial services business,” says ASIC.
An adviser is likely to be banned in instances where the regulator has concerns about the person, or the way an advisory business is being (or has been) conducted. ASIC may also issue a ban even if the person has rectified breaches or has taken steps to prevent further non-compliant conduct. And of course, the person’s attitude to compliance is taken into account.
For years, the reporting of significant breaches has been difficult and too slow a process. It lacked integrity and transparency. The Royal Commission was able to help identify and strengthen the breach reporting regime for AFSL. Because in the end, protecting vulnerable clients and regaining the trust in the financial services, insurance and superannuation markets should be ASIC’s strategic priority.
