The SMSF Association has predicted three possible financial advice outcomes resulting from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, each with differing degrees of severity.
The first forecast, considered by the industry body as the least disruptive and involved, is adjusting the current legislation governing advisers.
“So [this would involve] refinements to best interest duty and opt-in and conflicted remuneration clauses. So very much a second version of FOFA (Future of Financial Advice) to tidy up the original legislation,” SMSF Association head of policy Jordan George said during the body’s final technical update for members in 2018.
“[This would mean] updating [some of the] Corporations Act laws which may not have operated as clearly as they should have.”
According to George, another possible outcome, with a medium level of disruption, would be the formal separation of advice providers and product providers.
“[This means] while you would still have the existing AFSL (Australian financial services licence) model so that AFSL [holders] could not be tied up with firms and create products,” he noted.
He pointed out a third potential recommendation, which would be the most disruptive for the financial advisory sector, is one dictating a move to an individual licensing model.
“[Here] all advisers would have to be self-licensed rather than be part of a dealer group, which would obviously be a very big disruption to the existing system,” he said.
The association remains adamant education can help eliminate some of the poor advice outcomes regarding SMSFs that were revealed during the inquiry proceedings and to this end drafted a submission to the royal commission in response to its interim report released in September 2018.
“It very much focused on SMSF education standards with a view that a lot of the issues that they had seen in their case studies could be avoided if we had specific SMSF education requirements in financial advice,” George said.
“So we believe that if people are speaking with SMSF clients, they should have to do specific SMSF education to ensure they have the right knowledge to do that.”
The final report complete with final recommendations is due to be released on 1 February.