The Financial Planning Association of Australia The Financial Planning Association of Australia

Major overhaul of AFSL system required to reflect new era of professionalism in financial planning


The Financial Planning Association of Australia (FPA) today launches its five-year policy platform by recommending a professional registration for individual financial planners replace the current system that requires an Australian Financial Services License (AFSL) to provide advice.

The FPA today revealed the cornerstone of its ground-breaking policy platform that if enacted will overhaul the way financial planners are licensed. The reforms come as the FPA begins work on its five-year roadmap with a three-pillar strategy focused on members, advocacy, and the benefits of financial planning to Australian consumers.

FPA CEO Dante De Gori CFP® said the law should be changed to focus the AFSL system on the regulation of financial products and remove the requirement for an AFSL to cover the provision of financial advice.

“While the AFSL system plays an important role in regulating financial products and services, recent reforms have focused the regulation of financial advice at the individual practitioner level,” Mr De Gori said.

“This is an appropriate approach and acknowledges the relationship between a client and their financial planner is a personal relationship, not one between an AFSL and the client. Future reforms to the regulation of financial advice should occur through the professional standards framework and rely on individual registration of financial planners.”

In this context, the FPA believes the continued use of the AFSL system to oversee the provision of financial advice duplicates regulation, creates significant additional regulatory cost and introduces potential conflicts between the views of the licensee and the professional judgement of the financial planner.

“The AFSL system should be maintained to provide regulatory oversight of financial products and some services,” Mr De Gori said.

“The future regulation of financial advice, however, should occur through individual registration and oversight, and not require an AFSL for a financial planner to provide financial advice.”

Professional registration

With the establishment of a single disciplinary body that will require the registration of all financial planners, the FPA sees the responsibility for registration resting with the individual financial planner and not their employer or licensee.

The registration of financial planners must include verification that they have complied with the professional standards for financial planners set by FASEA, including passing the professional exam, meeting the education standard and ongoing compliance with the ethical standards.

“This information should be provided by the individual financial planner and verified as correct by the single disciplinary body,” Mr De Gori said. “In this manner, the register will become an authoritative source of information on each financial planner, including their qualifications, compliance with professional standards and disciplinary record.”

By placing responsibility for registering on individual financial planners, the register will promote portability of qualifications between businesses and licensees, and promote financial planners taking responsibility for their qualifications and compliance with professional standards.

“Registration can be more bespoke, based on the skill, education and experience of the individual providing the service, rather than their licensee,” Mr De Gori said.

“Registering with the single disciplinary body and maintaining accurate information on the register should be the individual responsibility of each financial planner, not their employer or licensee.

“Information on the register relating to a financial planner should be verified by the single disciplinary body and represent an authorised record of whether a financial planner has complied with their professional standards.”

Separation of product and advice

The FPA is recommending several significant reforms that aim to streamline regulation of the financial planning profession. Advancing the profession is the spirit of the policy framework, which includes the separation of product and advice.

“The regulation of financial advice is currently tied to the recommendation of a financial product, reflecting a history in which a product recommendation was the core component of most financial advice. In a professionalised financial planning sector, this is no longer the case,” Mr De Gori said.

“Contemporary financial planning is about a lot more than recommending financial products. There is a wide variety of topics that might be covered by financial advice and many may not include a product recommendation. Regulation of financial advice should reflect the variety of advice that can be provided, and not continue to be tied to financial product recommendations,” he said.

The FPA believes existing requirements to deliver financial advice should be reviewed to ensure they apply effectively to financial advice that does not include a product recommendation.

“Future regulation of financial advice should focus on the broad nature of contemporary financial advice and not limit its focus to financial products,” Mr De Gori said.

“The law should be changed to separate the regulation of financial products from the regulation of financial advice.