The Government held a forum of various funds management groups yesterday to discuss opposition to its controversial proposal to split financial services licences between advice and product sales.

The forum was convened by Federal Treasury at the ASIC offices in Sydney in response to Treasury’s ‘Corporate and Financial Services Review Proposals Paper’, which was published in April last year. The paper’s most contentious proposal, Proposal 1.1, would allow financial services providers to choose to make sales recommendations, or provide advice, but not both. As part of a sales transaction a provider could recommend financial products based on consideration of a client’s objectives, financial situation and needs without that recommendation constituting financial advice and triggering the advice requirements. Advice in relation to superannuation was proposed to be excluded from the sales recommendation regime. Companies would be able to hold both advice and sales recommendation authorities but at the individual level a representative could not wear the two hats at the same time. In a background note sent to interested parties last week, Treasury said that Proposal 1.1 “attracted significant debate”. “There is general agreement that it is a far-reaching proposal that would have significant consequences for the financial services industry,” Treasury said. “The views on the proposal varied from strong support to strong disagreement. Overall, the proposal was not generally supported and in many cases submissions suggested certain amendments or additions to the proposal in its current form, some of which are significant. “Irrespective of whether they supported the proposal or not, industry and consumer organisations strongly recommended further discussions on this issue to resolve outstanding problems with the definition of advice,” Treasury said. The majority of industry participants who made submissions on the proposal do not believe that consumers would be able to make the distinction between advice and sales. Further, some said that the proposal would result in a significant change to the structure of the market and, particularly, a reduction in the availability of financial advice if the market moved to a sales-only structure.

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