The new standards for financial advisers impact industry super
The FASEA regime came into play in January this year to raise the education, training and ethical standards of financial advisers. As well as impacting advisers, FASEA has implications for licensees and funds.
Much of the focus has been on the educational standards, but it is the ethical standards, and the regimes to enforce them, that has potential to revolutionise advice. These will be keenly felt by those who see advice as a means of product distribution, but they also affect those who offer advice as a service to improve members’ financial futures.
The ethical standards specifically target individual advisers, holding them to a best interest duty to their clients. From April 2020, all advisers will be monitored. An adviser who doesn’t act in the spirit of a fiduciary will not be compliant, even if they meet their obligations under the Corporations Act. Advisers who don’t meet the standards may find they are no longer able to practise.
The potential impacts for industry super sit across three areas.
- As the client’s fiduciary, advisers are required to recommend products most suited to their client’s needs and not just a product offered by their fund. This reinforces the practice whereby in-house advisers may need to make recommendations away from their fund.
- The ethical standards have been designed for complex advice and don’t contemplate intrafund and limited advice. This will put added pressure on funds’ ability to offer high quality, cost effective advice to their members.
- While the focus is on the individual adviser, any breach will be registered by ASIC and publicly available. So, a breach by an adviser can have a brand impact on licensees and funds including reputational damage.
To operate in this new environment, funds need a good licensee with the right infrastructure. Culture is critical as is having strong risk management, and the tools, systems and processes needed to run advice.
Even though there is still some uncertainty as to how some parts of the standards will play out, it is essential to act now and there a number of steps that funds need to take.
Contact Chris Joiner, Executive Manager Advice Solutions on 03 9657 4305 or email@example.com.