Product intervention powers for the Australian Securities and Investments Commission may see approved product lists (APLs) shrink, the Association of Financial Advisers (AFA) says.

In a submission to Treasury it warns this may occur “as licensees seek to avoid the unnecessary complexity that will arise in having broad APLs and where an adviser might want to recommend a non-approved product”.

It says: “The impact of this is a reduction in competition and choice for consumers.”

The AFA is not opposed to the design and distribution obligations and product intervention power legislation, particularly in the context of higher-risk products.

But it is concerned the legislation will impose considerable regulatory costs on low-risk products such as life insurance. It argues the legislation would best serve consumers if focused on high-risk investment products.

Costs will arise from record-keeping obligations in the proposed legislation.

“This will have a particularly big impact upon those classified as distributors, including financial advisers,” the submission says.

“We are particularly concerned about the proposal that product issuers will decide what information needs to be recorded and how it will be provided. This will cause a great deal of uncertainty and cost for distributors.”

The AFA argues the legislation should reduce record-keeping for low-risk products.

Another area of concern is advisers being unable to recommend a product outside their APLs, because there will be no distribution agreement.

“This will potentially impact upon an adviser’s ability to meet the best-interests duty.”

The AFA is also concerned at the obligation for advisers to collect distribution information.

“These obligations will apply to financial advisers who already have obligations to document their advice, including through the preparation of statements of advice. Depending upon what information is required, this might require financial advisers to maintain an active consolidated record of all clients in each applicable financial product.”

The AFA accepts some advisers may have systems to undertake this, but it is not universal.