The Australian Institute of Superannuation Trustees (AIST) has expressed concerns over the opt-in legislation as proposed in the first tranche of the Future of Financial Advice (FOFA) reforms.
AIST said in a submission to Treasury today that it strongly supports the intent of proposed FOFA reforms, but said it had concerns with how the new rules primarily apply to new clients under the opt-in proposal.
The draft legislation for the proposed opt-in requirements now only applies to new clients and the definition is very broad and open to abuse, AIST said.
AIST would like to see the opt-in requirement applied to all clients receiving ongoing advice.
However, based on the legislation at hand we recommend the exclusion be applied only to those clients who actually received personal advice.
"This is a critical package of reforms that we have to get right - not only to protect consumers, but to generate greater trust and professionalism across the financial advisory industry," AIST policy and research manager Tom Garcia said.
The institute also said a fee disclosure statement should be provided to all clients on an annual basis in addition and regardless of any opt-in requirements and argued for a renewal notice to be provided to all clients who are part of a client book that has been sold to another provider.
The institute recommended that 'best interests obligations' should be principles based as a more prescriptive approach, such as a checklist for advice, could create loopholes or a situation where the checklist is used as template for advice.
AIST said the draft legislation was also too vague on the application of scaled advice.
It also said ASIC should have increased auditing capabilities in addition to its extended licensing and banning powers.
