Several myths have arisen regarding the Future of Financial Advice (FOFA) reforms, the Australian Securities and Investments Commission (ASIC) has warned.

One misconception is that for planners to satisfy the best-interests duty, clients must be financially better off after receiving advice, ASIC Senior Manager Financial Advisers Kate Metz says.

But clients may be better off in other ways after receiving help, such as the assurance they are on track for retirement, she told financial planners at a Melbourne workshop last week.

It is a myth that advisers must give perfect advice and that there is a different set of rules for scaled and comprehensive advice, Ms Metz says.

Because FOFA bans conflicted remuneration some advisers think performance-based benefits will be banned, but this is also untrue.

She says such benefits are only conflicted if they can be reasonably expected to influence the advice provided or products recommended.

Employers should evaluate performance based on quality advice and client satisfaction, rather than volume.

“If any part of the benefit is volume-based it is presumed to be conflicted remuneration,” Ms Metz said. “However, employers are able to rebut this presumption by showing the benefit is not one that could be reasonably expected to influence the advice provided by the employee.”

Another area of confusion concerns whether advisers should stick to their approved product list (APL) to meet the best-interests duty.

“Sometimes an advice provider will need to go beyond the scope of their APL,” Ms Metz said.

Examples of this include if a client’s existing product is not on the list; if the APL is restricted to one class of product and another class will better meet a client’s goals; and if a client asks an adviser to consider a product not on the list.

“If the advice-provider doesn’t want to give advice beyond the APL, they can always refuse to give advice.”

It is also wrong to think codes will be an easy way to avoid compliance with opt-in provisions, Ms Metz says.

Codes must ensure substantially the same policy outcomes, promoting client engagement and ensuring disengaged clients do not pay ongoing fees.