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ASIC consults on how to scale advice

by Martha.Ware 1. August 2011 08:42

ASIC has released a consultation paper proposing new guidance for people who give advice to retail clients.

This builds on ASIC Regulatory Guide 200 Access to advice for super fund members (RG 200) and ASIC’s Report 224 Access to Financial Advice in Australia (REP 224) in December 2010. This report found that one third of Australians now prefer piece-by-piece advice rather than holistic or comprehensive advice.

It also follows the update announcement by the Assistant Treasurer and Minister for Financial Services and Superannuation, Minister Bill Shorten, in April 2011 on the Future of Financial Advice reforms.

ASIC Chairman Greg Medcraft said: ‘Many Australians would like more information and advice before making a decision in relation to a financial product. This will help them to be confident and informed investors. The proposals outlined in ASIC’s consultation paper aim to improve access to advice and give guidance about how simple, piece-by-piece advice can be provided by anybody in the advice industry.’

ASIC’s Consultation Paper 164 Additional guidance on how to scale advice gives guidance about how to scale financial product advice to retail clients, and includes eight examples of giving information and advice to clients about:

  • car insurance
  • purchasing shares
  • investing an inheritance
  • adopting a transition to retirement strategy
  • superannuation pension products
  • nominating a beneficiary for superannuation savings
  • superannuation and Centrelink; and
  • retirement planning issues.


CP 164 also describes the differences between factual information, general advice and personal advice.

This is the first phase of consultation on how to scale advice. Based on feedback to this consultation paper, ASIC will produce further examples of factual information, general advice and scaled personal advice on other topics in phase two.

Submissions to CP 164 close on Thursday, 8 September 2011.

Click here to view the consultation paper.

Background

Section 945A of the Corporations Act 2001 contains a ‘suitability rule’. To give suitable advice, as an AFS licensee or an authorised representative you must:

  • know your client - determine the relevant personal circumstances in relation to giving the advice and make reasonable inquiries about those personal circumstances
  • know your product - having regard to information you obtain from the client about their personal circumstances, consider and conduct investigation of the subject matter of the advice as is reasonable in all of the circumstances; and
  • ensure your advice is appropriate to the client, having regard to your consideration and investigation of the subject matter of the advice (s 945A(1)).

The new guidance in CP 164 explains how you can scale advice in a way that complies with s 945A.

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