Brokers will be included in the Australian Securities and Investments Commission’s (ASIC) new proposed regulations on scaled advice.

The new rules cover advice to retail clients on a single subject rather than comprehensive advice looking at a client’s whole financial situation.

In its Consultative Paper 164 (CP164), ASIC says the advice must be simple, but the broker or financial adviser will still need to obtain and analyse enough information to provide the specific advice.

The people giving the advice will still be expected to act honestly, efficiently and fairly.

If a client’s circumstances become more complex during the enquiry stage, the financial adviser or broker would be required to expand the level of advice being given.

Brokers and advisers will need to explain to the client that the advice is limited to the single topic.

However, inclusion in the proposed regulation would seem to extend beyond brokers and advisers, as ASIC includes examples of call centre staff talking about motor insurance to a client.

ASIC Chairman Greg Medcraft says many Australians would like more information and advice before making a decision in relation to a financial product.

“The proposals outlined in ASIC’s consultation paper aim to improve access to advice and give guidance about how simple, piece-by-piece advice can be provided by anybody in the advice industry,” he said.

But the final form of what is scaled advice will depend of the Future of Financial Advice (FOFA) legislation, due sometime this month.

“We are monitoring developments with the FOFA reforms, including the proposed duty on advisers to act in the client’s best interest,” the paper said.

“Due to uncertainty about the final form of these reforms, we have not included commentary on the scoping issue in this consultation paper.”

The Insurance Council of Australia (ICA) has welcomed the paper saying it is hopeful it “will encourage more general insurers to consider the possibility of providing advice on how their insurance policies meet a consumer’s needs”.  

“We note that CP164 does not address the operation of the proposed ‘best interest duty’,” ICA said in a statement to insuranceNEWS.com.au.

“The pragmatic application of this duty in determining the scope of advice to be provided will be crucial to realising the industry’s hopes of being able to provide the low level advice generally needed by consumers looking for general insurance.”  

But not everybody has welcomed the paper, with the Financial Planning Association (FPA) also picking up on the lack of guidance on what is the ‘best interest duty’.

FPA CEO Mark Rantall says part of the FOFA reforms was the promise to deliver affordable advice that is in the client’s best interest.

“The consultation guidance paper released by ASIC is a positive step but, in our opinion, does not fully deliver on this objective,” he said.

“The FPA provided clear feedback to ASIC on this issue and we strongly recommended that ASIC not release the consultation guidance paper until the ‘best interest duty’ had been formulated and incorporated as part of this guide.

“In releasing this consultation paper without incorporating this, ASIC may actually cause further confusion rather than guidance or clarification for consumers and the profession.”

Mr Rantall says the paper also doesn’t address how an adviser who delivers comprehensive advice can provide scaled advice in an efficient and effective manner.

“Failing to consider any other aspect of someone’s financial circumstances other than superannuation is a worryingly narrow view of financial services that doesn’t reflect the range of considerations advisers look at when providing financial advice,” he said.