The Financial Planning Association (FPA) wants clarity on who is legally responsible for providing advice under the Corporations Act.

A draft bill on adviser professional standards says an adviser’s supervisor must approve advice given.

In a submission to Treasury, the FPA says the proposed legislation’s wording is confusing and not beneficial to consumers.

“This raises a number of potential issues that may need to be clarified to ensure appropriate working of the section of the legislation as intended,” the association’s submission says.

“It isn’t clear who is ultimately responsible for the advice being provided.

“It therefore isn’t clear who a consumer would complain to and who would bear ultimate responsibility for the advice.”

The FPA proposes regulatory action regarding poor advice should be taken against both the supervisor and the adviser.

“We believe it is appropriate for both parties involved in the provision of the advice to have skin in the game, to ensure appropriate responsibility and due care is taken for the advice being provided.

“We would suggest the current drafting is appropriate, but as a minimum both the supervisor and the provisional relevant provider should have responsibility for the advice being provided.”

The FPA also raises the issue of obtaining professional indemnity cover when it uncertain who is responsible for advice. It is not clear if insurance would be for both the supervisor and the adviser in the event of a claim.

The association wants the proposed legislation to follow other laws requiring the supervisor to inform the client of their role in the advice process.

It notes that under the Tax Agent Services Act this has been achieved through a standard disclaimer included in the statement of advice document.

“A similar mechanism could also be considered by the Government to ensure consistent disclosure to a consumer,” the submission says.

“Alternatively, the FPA will be asking the Australian Securities and Investments Commission to ensure this is contained within a terms of engagement that is signed by the client.”