Speaking to InvestorDaily, Mr Vrisakis said the removal from the Corporations Act of section 961B(2)(g) – the so-called ‘catch-all’ provision of the best interests duty which requires advisers to ‘take any other step’ which could be in the client’s best interest – will not come at the expense of the best interests obligation.
As it currently stands, the FOFA best interests duty lacks clarity and makes it difficult for financial advisers to prove they are meeting their obligations, he said.
“We’ve had very learned commentary from [retired] judges on these provisions, and the view has been that the catch-all [provision] didn’t provide any sort of defence,” said Mr Vrisakis.
There are already a number of obligations at general law that require advisers to give appropriate advice and be ‘frank and open’ with their clients, he said.
“You’ve got a duty of care to the client as part of your normal contractual interactions with them,” said Mr Vrisakis.
Industry Super Australia chief executive David Whiteley recently claimed that under the amended legislation, a financial planner would be able to place a client in shares without needing to ask whether or not they had a large credit card debt.
“The only way that could happen [legally] would be if the client was absolutely warned of the consequences,” said Mr Vrisakis.
Other legal obligations would “kick in” at the point the adviser began the conversation about shares with the client, he said.
“If you warn the client about that and then the client still wants to go ahead, then you’ve probably satisfied your obligations giving appropriate advice,” said Mr Vrisakis.
“But I can’t see how you can give appropriate advice if you haven’t warned the client about the risks that would happen based on that strategy that the client is using,” he said.
When it comes to the removal of the ban on conflicted remuneration within general advice, the question is more of a policy matter than a legal one, said Mr Vrisakis.
“The balance of the policy outcomes you’re seeking is between the conflicted remuneration regime versus the accessibility – and the reality of what types of advice people will get,” he said.
