One submitter suggested that, because they conflicted with the primacy of consumer choice, standards 11, 12, 13 and 14 should not be included.
One submitter stated that suitability requirements were outside the scope of what the Code should regulate, and should be left to the good business practices of advisers.
Another submitter suggested that these requirements were impractical and ignored section 3(a) of the FAA. The submitter suggested that the client should decide.
One submitter stated that the suitability standards should not be included in the Code.
Different types of services
One submitter stated that not everyone requires a full financial planning service so it is unnecessary and would add to all clients’ costs through extra compliance.
One submitter was concerned that the focus in the proposals on suitability could have a tendency to lead customers towards costly “full-service” financial planning services that would not be suitable in all circumstances.
Eleven submitters suggested that the Code should be more flexible to take account of clients who do not require a full financial planning service to avoid unnecessary compliance costs.
One submitter stated that the proposed minimum suitability standards are not practical or necessary for two of the three types of financial adviser services: financial advice and investment transactions. They submitted that the proposed standards would require AFAs to conduct suitability analyses when financial advice is given as an incidental part of the financial services provided by the AFA’s respective employers. It was submitted that this will include:
• answering common, over-the-counter questions such as “what is the best term deposit rate today?” or “which account is better for school children?” and
• performing investment transactions without client contact.
One submitter argued that the Code should recognise those services below full financial planning to avoid imposing unnecessary compliance costs.
Another submitter criticised the assumption that all advisers are providing comprehensive financial planning advice, and questioned whether the Act intended the Code to be so prescriptive.
One submitter suggested that the Code should be flexible to take account of sophisticated clients who do not require a full financial planning service.
Nine submitters suggested that it will not always be appropriate to disclose full details of his assets to his adviser. The submitters believed that it was within the client’s rights to seek limited advice and provide limited information in order to receive it.
One submitter was opposed to the proposition that he would be obliged to reveal all his personal information to an AFA, who would then conduct a suitability analysis and tell him what advice he was allowed to receive. That submitter suggested that it should be for the investor to decide how much
information to disclose, and for the investor to decide what advice to receive. It was stated that if the client wants it a comprehensive financial planning service they can ask for it.
Two submitters pointed out that these standards do not appear to take account of the provision of a “discretionary investment management service”.
One submitter stated that not all clients require the protection of the suitability standards and that some simply want a particular transaction done and should be able to do that without too much paperwork.
One submitter expressed concern that requiring AFAs to perform a suitability analysis for all types of financial adviser services (rather than only financial planning services) may be impractical and unrealistic in many situations, and that it may impose considerable cost barriers to obtaining financial advice.
One submitter stated that the Code should provide flexibility so that the AFA can execute the client’s instructions and not receive full information on the client’s particular circumstance if that is the wish of the client.
One submitter stated that the standards need to allow for different consumers’ needs otherwise all clients will be subject to unnecessary compliance costs.
One submitter stated that there is no recognition of sophisticated investors or those who wish to operate on a transaction or execution basis. He suggested that the Code must address this and provide a low regulation/low cost solution (status quo) to enable this sector to operate efficiently. Two submitters stated that the code fails to provide for clients who do not want a full financial planning service. They submitted that more flexibility needs to be allowed for recognition of the client’s sophistication to prevent unnecessary compliance costs.
One submitter agreed with the suitability standards in principle but that it needs to accommodate or address specialist providers that are only providing general or product advice without reference to the overall portfolio of a particular client.
One submitter stated that the principle of suitability (and proposed standards 10-14) should not apply to institutional investors as they do not require and do not want the protection. It was suggested that such a service will be of no benefit to institutional clients and such clients are unlikely to provide AFAs with the financial information to undertake the analysis and the outcome (that in the absence of such information, an AFA must restrict their advice) is not commercial. In many cases an AFA only provides execution services to an institutional client.
Retail and wholesale customers
One submitter made the following comments with regard to “retail” customers and proposed standard 15:
• A statement of advice should only be required to be provided and explained when providing financial planning services. However the customer should be verbally advised that they can request any advice in writing. If financial advice is merely being provided, a record should be kept but it should not need to be documented before being given to the customer.
• If the Code does require advice to be provided in writing, guidance should be provided on what is “not practicable”.
• It was submitted that if the Code requires a record of financial advice be kept, it should not necessarily need to be provided to the customer.
That submitter also made the following comment with regard to “wholesale” customers and proposed standard 15:
• A statement of advice should not be required to be provided and explained to wholesale customers.
• That wholesale customers have access to their own internal and external financial and legal resources as well as their own expertise. They stated that wholesale customers do not need or want the same level of protection as retail customers.
That submitter stated that proposed standard 16 should only apply to “retail” customers receiving financial planning services.