Consultation Paper 214: Updated record-keeping obligations for AFS licensees proposes amendments to the recently legislated Future of Financial Advice (FOFA) reforms via three class orders.
Licensees will be required to retain a record of personal advice delivered to retail clients as it relates to the best interests duty, and they will also have record-keeping obligations in relation to conflicted remuneration.
In addition, superannuation trustees will be required to retain a record of intra-fund advice that is provided to members.
But according to the FSC submission, the obligation for licensees and trustees to retain records of the advice is at odds with industry practice and would impose unreasonable costs upon the industry.
The resulting IT infrastructure investment would likely be in excess of $100 million across the industry, said the FSC.
“The phrasings used in the proposals do not reflect a majority of the industry, where authorised representatives are geographically spread and operate out of their own premises”, said the submission.
“The record-keeping proposals as stipulated will cause the industry to change practices and require the industry to invest in another significant change program to comply,” said the FSC.
Given that the advice provider is often physically located apart from the licensee, it is neither practical nor cost-effective to suggest that both parties should maintain a record of the same file, said the submission.
FSC senior policy manager Cecilia Storniolo pointed out that the proposals will increase the cost of advice with “no additional benefit to the client”.
“It cannot be overstated how time-consuming, expensive, disruptive and unproductive it will be to have to revisit FOFA-related systems, policies and processes to capture these proposed record-keeping obligations,” said Ms Storniolo.
The FSC submission called on ASIC to issue a regulatory guide to clarify which party is required to keep the advice records.
Without clarity, there is a “real risk of licensees overcompensating and adopting a more conservative approach due to fear of breaking the law”, said the submission.
