Here’s how new laws are changing advice

Here’s how new laws are changing advice

Alex Burke

In a joint statement, Treasurer Josh Frydenberg and Assistant Treasurer Stuart Robert announced the passing of laws which shake up how you’ll receive financial advice in the future.

The laws target “retail product distribution conduct,” which essentially means receiving advice on a particular investment product (such as a managed fund). The Treasury said these laws will make consumers “better protected from being sold financial and credit products that are not suitable for their circumstances.”

What does this mean for you?

Companies making products

At the outset, the people designing a financial product you might invest in will need to identify, in advance, the consumers for whom the product is appropriate. In welcoming the new laws, the Australian Securities and Investments Commission said this represents a “fundamental shift away from relying predominantly on disclosure to drive good consumer outcomes.”

ASIC will have the power to intervene in circumstances where the regulator considers a product to present a significant risk of “consumer detriment.” These powers take effect immediately.

Advisers and distributors

When receiving advice, your adviser will now need to implement controls to ensure products are distributed in accordance with the relevant target markets and “comply with reasonable requests for information from the issuer in relation to the product’s review.”

What this means is that your adviser will be prohibited from dealing in and providing advice on a product unless the product manufacturer has provided a clear determination of whom the product is designed for. If one has been made, your adviser will need to take “reasonable steps” to ensure any advice provided is consistent with the target market determination.

ASIC chair James Shipton said this will also enable ASIC to “take broader, more proactive action to improve standards and achieve fairer consumer outcomes in the financial services sector. This will be a significant boost for ASIC in achieving its vision of a fair, strong and efficient financial system for all Australians.”

Wrapping it up

While ASIC’s expanded intervention powers have taken immediate effect, parts of the new obligations for distributors and issuers will be phased in over the next two years. You can read the new legislation in detail here.

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