Advisers need to be mindful that adherence to the best interest duty introduced under the Future of Financial Advice reforms is not solely determined by the financial outcomes of their clients, a compliance specialist has said.
Speaking at the financialobserver Compliance and Risk Management for Advisers seminar in Sydney, Alexis Compliance and Risk Solutions founding director Christina Kalantzis told delegates: “ASIC (Australian Securities and Investments Commission) can ban you even though you’ve never produced a loss for your clients, all your clients are financially better off, but you didn’t adhere to the best interest duty on the paperwork.
“As much as advisers don’t want to hear this, because they’ve got a client care model and a client-centric model, you have to actually commit to the paperwork.”
Kalantzis pointed out this was actually the biggest issue to come out of the latest ASIC review into financial advice provided to SMSFs.
To this end, she emphasised comments ASIC deputy chair Peter Kell made at the banking royal commission admitting a much smaller proportion of the 90 per cent of SMSF advice found to be non-compliant indicated any consumer detriment.
“When this was reported the headline everywhere was advisers’ performance was poor and 90 per cent of SMSF advice doesn’t satisfy the best interest duty, but no one picked up the fact that the majority of these cases did not result in consumer detriment,” she said.
With regard to the paperwork required, she detailed the types of issues advisers need to account for.
“The important things to ask yourself are did you produce the SOA (statement of advice), was it appropriate to the client, was the advice in the best interests of the client, did you provide a comparison of a replacement product, did you disclose the fees, and was there any deceptive and misleading conduct,” she warned.
“These are the sort of things we look at.”
