The Financial Planning Association (FPA) has outlined its concerns about the incoming design and distribution obligations (DDO) regime in a submission to Treasury.

The DDO regime is set to commence on October 5.

FPA says it supports the DDO Interim Measures Instrument 2021 that is currently out for stakeholder consultation but is disappointed that it does not address the unnecessary and unworkable record keeping and reporting obligations the DDO Act places on financial planners.

The peak body says applying the DDOs to planners ignores the higher standards of the financial advice regime and brings into question whether some elements of the regime are fit-for-purpose.

According to the FPA, the reporting and record keeping requirements in the DDO regime look at product regulation from the product perspective and the potential risk/harm posed to retail clients, as identified under the target market determination, as a whole.

In contrast, when providing personal advice, financial planners consider the appropriateness of each product recommendation in relation to the individual client’s circumstances and as one part of that client’s broader financial plan.

“The product must be suitable for the role it will play in the financial plan to achieve the client’s immediate and longer-term goals and meet likely future interests and needs,” the FPA submission said.

“These obligations also require planners to clearly demonstrate that the client would be in a better financial position and that it would improve the client’s financial wellbeing if the advice were followed.

“This will be different for each client of the financial planner.”

FPA says financial planners currently have stringent disclosure, record keeping and reporting requirements under the financial advice provisions in the Corporations Act.

“Imposing additional reporting and record keeping requirements that do not naturally ‘fit’ in existing advice processes and reporting, would create an additional onerous administrative burden for planners as the conclusions a planner draws about the risks and appropriateness of a product will differ based on each client’s circumstances,” FPA said.

“Given financial planners are permitted to provide personal financial advice that is inconsistent with the product issuer’s [target market determination], the FPA questions whether any additional consumer protections would be gained by imposing the DDO reporting and record keeping obligations on planners.”

Click here for the submission.