Advice group principles provide security


By Sarah Kendell

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Advice groups should be proactive in devising professional and ethical commitments for their advisers that go beyond the Corporations Act as the industry was ultimately heading toward further regulation to shore up consumer protection, according to Fortnum Financial Advisers.

In a new white paper, “Building a Professional Advice Framework”, Fortnum group chief executive Neil Younger and managing director Joel Taylor said that despite a raft of new regulations being introduced to financial planning in recent years, there were still problem areas that were likely to lead to further legislative action.

These included a lack of restrictions around dealer group ownership, subsidisation of adviser licence fees by institutions and the narrow range of products permitted to be on aligned advisers’ approved product lists.

“They all point to an under-regulated industry with major shortcomings when it comes to consumer protection,” the report said.

“Therefore, it’s dangerous for advisers to rely on the Corps Act for guidance on how to meet their best interest duty obligations – they need to have a set of professional principles to guide them.”

Having a set of guiding principles could also empower advisers to use their own professional judgment rather than relying on compliance restrictions as the only measurement of a good strategy for a client, the paper said.

That meant being more than just an “order taker” and proactively flagging issues of concern with clients who were seeking limited-scope advice, Younger told financialobserver.

“There is a need to look at the context around the client request and to identify factors that should be considered in making decisions,” he said.

“Sometimes if the decisions the client wants to make are inappropriate, then the advice should reflect that view.”

That approach could reassure both the individual adviser and dealer group that quality, compliant advice was being given, and that this could be easily proven in the event of any client complaints or regulatory investigations, he said.

“Our position is we believe using [a] professional advice framework allows advisers to have more confidence in the appropriateness and defensibility of their advice,” he noted.

According to the paper, Fortnum’s own professional advice framework had been developed with four key pillars in mind to guide the financial planning business’s advisers – fair engagement, competence, professional diagnosis and the client’s best interest.

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