Industry bodies have expressed concern with the Australian Securities and Investments Commission’s guidelines (CP164) on scaled advice.

The Financial Planning Association (FPA) is calling for the guidelines to be deferred until after the Future of Financial Advice (FOFA) reforms are implemented. 

“We concur there needs to be a guide (on scaled advice), but it cannot be undertaken without considering FOFA,” GM Policy and Government Relations Dante De Gori told insuranceNEWS.com.au.

“It doesn’t consider the best interest duty proposals that are in the FOFA [reforms], so we believe the guidelines shouldn’t come out until after the legislation.”

The National Insurance Brokers Association (NIBA) has expressed concerns about how much advice a broker should be giving to a client.

“We have some difficulty with scaled advice,” NIBA CEO Dallas Booth told insuranceNEWS.com.au.

“You can either give good sound advice to a retail customer or not mislead them into believing they are getting comprehensive advice.”

Both associations have concerns over the “one-size-fits-all” approach of the guidelines and who will have to work with them.

“You have FPA members providing full planning services and at the other end of the scale, there are advisers provides advice on one product type,” Mr De Gori said. “We admit this is the challenge facing ASIC on defining the guidelines.”

Mr Booth says the guidelines could lead to brokers being pushed to give additional advice.

“It is up to the broker to decide their level of competence and if they feel the client wants specialist advice, to recommend they go and see somebody else.

“The problem is finding a way of preserving the role of the broker and regulation mitigating against that.”

Mr De Gori says at present the guidelines do not explain how a participant delivering financial advice can use the guidelines.

“We don’t want scaled advice to be perceived (by consumers) as cheap and nasty advice,” Mr De Gori said.

Radford Lawyers principal Mark Radford, who advises NIBA and other organisations on regulatory issues, agrees the paper’s proposals on how much advice should be given to clients does create some problems.

“The examples in the consultation paper don’t address the conflict of interest issues that are likely to arise when an insurer is the product issuer is giving personal advice,” he told insuranceNEWS.com.au.  

“The dangers are if an insurer provides a client some additional information and there is a dispute about a claim, the insured could come back and say the insurer misled them with the advice.”

Mr De Gori says section 945a of the Corporations Act covering areas of knowing the client and product will have to be changed because of both the proposed FOFA legislation and ASIC’s guidelines.

“If both are implemented, section 945a won’t exist,” he said. “This will have to be updated very quickly.”