Regulators in Australia are developing guidance for financial firms to follow when they must review of the adequacy of retail financial advice, and pay compensation to clients for deficient advice.
The Australian Securities and Investments Commission (ASIC) has announced it is working on new guidance for review and remediation programs conducted by firms that provide financial advice.
The ASIC says that over the last few years there have been a number of large scale exercises to review the advice provided to retail clients, and to compensate those clients; and, that there have also been several smaller, more targeted review and remediation programs. Now, it is aiming to bring some standards to those processes.
“Licensees that provide personal advice to retail clients should have robust review and remediation programs in place to protect their clients,” said ASIC’s deputy chair, Peter Kell. “We want to ensure that if a financial advice licensee needs to provide remediation, they do so in a way that is fair, honest and efficient. Consumers will have greater trust if they can be confident that any remediation program is consistent and transparent.”
The ASIC says that its experience shows that there are a number of issues to consider when setting up these sorts of programs, including: getting the scope of the review right; ensuring effective, timely and targeted communication to clients, so that they understand and participate in the program; ensuring that the process of review and remediation is comprehensive, timely, fair, and transparent; and, that clients have free access to external processes to review the firm’s assessment of their advice.
The planned new guidance will build on the regulator’s recent experience overseeing review and remediation programs, along with its existing guidance on dispute resolution. The regulator says that it plans to consult with consumer groups, external dispute resolution schemes (ombudsman), compliance advisers and industry participants in developing the guidance in this area.