In a stark document released late yesterday, the Financial Planning Association (FPA) revealed new draft rules that could add to the cost of advice and banish ‘sweetner’ deals between product providers, licence-holders and financial advisers.

The long-awaited ‘Draft Principles on Conflicts of Interest’ – a joint project of the FPA and the Investment and Financial Services Association (IFSA) – has reduced the ‘principles’ from an original seven in the discussion paper to only four: “1. The separation of advice, administration and product fees 2. There is no preferential remuneration between the AFS licensee and their representatives 3. Financial planners will not advise on or recommend products that have the potential to bring the industry into disrepute 4. Separate corporate governance to be in place between an advisory group and any related party.” Principal number 3 is sure to raise heated debate in the industry over what constitutes “… the potential to bring the industry into disrepute”. However, the FPA said the revised ‘principles’ took into account duplication of other “fiduciary” guidelines and collapsed the number to a more manageable four. The FPA statement says: “A further outcome of the Principles will be the elimination of preferential remuneration on certain products where the adviser is paid more for recommending ‘in-house’ products and preferential awarding of equity (Principle 2).” According to newly-selected FPA Board Chair, Corinna Dieters, who replaced Kathryn Greiner in the position earlier this month: “… a number of Principal members have already considered the Draft Principles and responded to them by implementing changes to their business practices.” However, the principles remain in draft form and will be considered further by IFSA, the regulators and other professional bodies. No date has been set for the release of the final Conflicts of Interest rules.

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