Brace Yourself for New 'Seller Beware' Laws

New rules that will make financial advisors and product issuers directly liable for ensuring financial products are only sold to suitable customers are progressing through Australia's parliament. 

This shift in responsibility from 'buyer beware' to 'seller beware' comes with wide ramifications. Similar laws in the UK are causing huge change at all points in the financial product supply-chain. 

Under the rules financial products must have defined 'target markets' — consumers for whom the product is suitable. Advisors must accommodate and reflect those target market definitions when making product recommendations. Selling a product outside its target market is possible, but requires extensive justification and comes with considerable risk for the advisor.    
The legislation is called the Corporations Amendment (Design and Distribution Obligations and Product Intervention Powers) 2018.

The legislation and explanatory notes are here: https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r6184

The proposed regulations have been circulated for comment and are here: https://treasury.gov.au/consultation/c2018-t337145/ 

The legislation has passed through a senate committee inquiry, and is now on its way back to the House of Representatives. Given the wide-ranging consumer protections built into this bill it could form part of the government response to the final report from the banking royal commission in early 2019. 

PlanPlus Global's CEO, Shawn Brayman, says the new rules acknowledge that most clients lack the abilities and knowledge needed to evaluate financial products and plans – no matter how much disclosure occurs. 

"In this new world product issuers and advisors are always responsible for ensuring suitability — and directly liable for any mis-selling" said Shawn. "Australians haven't yet recognised the tremendous significance of these new financial suitability laws, which turn conventional wisdom about who is liable for what on its head". Read more here: Wealth Industry Unprepared.

Posted: 27/11/2018 2:07:25 PM by FinaMetrica Pty Limited