Broad view of financial advice Flashcards
What are the four distinct areas of financial advice?
Financial product advice, credit advice, non-financial product advice and tax advice.
What is financial planning primarily involved in?
Developing strategies to assist clients to manage their financial affairs.
Why do clients need to manage their financial affairs?
To build wealth, be financially secure and achieve lifestyle goals.
What does holistic financial advice cover?
Wid range of a client’s lifestyle and financial circumstances.
What are two types of financial advice?
Holistic and limited.
What is scaled financial advice also known as?
Limited financial advice.
What may limited financial advice focus on?
Advice might focus on one area of a client’s situation.
What does ASIC stand for?
Australian Securities and Investments Commission
What is ASIC responsible for?
Responsible for monitoring and promoting market integrity and consumer protection across the
financial system.
Who is responsible for financial planners?
ASIC.
What does APRA stand for?
Australian Prudential Regulation Authority.
What does APRA do?
Supervises financial institutions to ensure they meet prudential standards, are in sound financial condition and have adequate and effective governance and risk management systems.
What does the ATO stand for?
Australian Tax Office.
What is the ATO primarily responsible for?
Collecting taxes.
Does the ATO administer various superannuation regulations?
Yes.
Who regulates SMSFs?
ATO.
What does SMSF stand for?
Self Managed Super Fund.
Who is the Tax Practioner Board affiliated with?
ATO.
What does TPB stand for?
Tax Practitioners Board.
What is the TPB responsible for?
Registration and regulation of tax agents, BAS agents and tax (financial) advisers.
What does AUSTRAC stand for?
Australian Transaction Reports and Analysis Centre.
What is AUSTRAC?
Australia’s financial intelligence unit.
What does AUSTRAC have regulatory responsibility?
Anti-money laundering and counter-terrorism.
What does OAIC stand for?
The Office of the Australian Information Commissioner (OAIC).
What does OAIC administer?
Privacy Act 1988 and the Australian Privacy Principles.
What does ASX stand for?
Australian Securities Exchange.
What is ASX responsible for?
Monitoring complance with the operating rules of the exchange.
What are two things that the ASX monitors?
Listing rules and continuous disclosure by entities.
What section of the Corporations Act defines financial services?
Chapter 7.
What section of the Corporations Act defines financial products?
Chapter 7.
What does Ch 7 of the Corporations Act set out?
Licensing requirements for providers of financial services and the standards for conduct and disclosure to retail clients.
What does the Insurance Contracts Act 1984 (Cth) seeks to strike a fair balance between whom?
The interests of insurers, the insured and other members of the public.
What principles are enshrined in the Insurance Contracts Act 1984 (Cth)?
Utmost good fait, duty of disclosure and cooling off period.
What legislation requires institutions to report certain transactions to AUSTRAC?
Financial Transaction Reports Act 1988 (Cth)
What does the Financial Transaction Reports Act 1988 (Cth)?
Requires financial institutions to report certain transactions to AUSTRAC.
What transactions to institutions need to report to ASIC?
Transactions over $10,000 and any suspicious activity above or below this level.
What legislation requires Australian financial service license holders to identify clients and assesst the risk?
Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth).
What does the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth) require financial license holders to do?
Adequately identify clients and assess the risks of clients
What client risks should fianncial services license holders be able to identify under the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth)?
The possibility of involvement in illegal activity and unexplained wealth.
What legislation is administered by OAIC?
The Privacy Act 1988 (Cth) (Privacy Act).
What does the Privacy Act 1988 regulate?
How private and public entities collect, store, use and disclose personal information.
What does APPs stand for?
The Australian Privacy Principles.
What does the Australian Privacy Principles highlight?
The processes financial advisors must implement to protect privacy.
What does the Australian Privacy Principles include?
The disclosure, collection and storage of personal information and the rights of the individual to access such information.
What does Competition and Consumer Act 2010 (CCA) form?
National consumer policy framework.
What is the objective of the Competition and Consumer Act 2010 (CCA)?
Improve consumer wellbeing.
How does the competition and consumer Act improve consumer wellbeing?
Empowerment and protection, foster effective competition, and enable consumers to participate confidently in markets in which both consumers and suppliers trade fairly.
What does the National Consumer Credit Protection Act do??
Protect consumers and ensure ethical and professional standards in the finance industry through the National Credit Code (NCC).
What is a code of practice?
A set of enforceable rules describing an industry’s commitments to deliver defined standards of behaviour for members of the industry.
What is an example of a code of practice?
Code of Professional Practice developed by the Financial Planning Association.
What are five typical areas of financial advice?
Budgeting, debt management, investments,
insurances and retirement planning.
What are some opportunities for the financial planning industry?
Increasing affluence, the growth in superannuation assets, changes to tax rules and age pension eligibility
and more complex financial products.
What are two issues for the financial planning industry?
Low engagement by consumers and a lack of trust.
What has low engagement and lack of trust towards the financial services industry been driver by?
Unethical behaviour and critisim of fianncial product renumeration.
What do organisations providing credit advice need to apply for?
Australian Credit License
What must organisations providing credit advice need to demonstrate?
Capacity, knowledge, skills and resources to operate a financial planning business.
What legislation requires real estate businesses and agents to be licensed?
State legislation requires real estate businesses and agents to be licensed.
How are real estate agents licensed?
An agent must pass a training course on buying and selling property, but this does not include assessing a client’s needs or giving advice
What legislation established TPB?
The Tax Agent Services Act 2009 (Cth)
Who registers tax practioners?
TPB.
Who regulates tax practioners?
TPB.
What do tax advisors advise clients on?
Advise clients on their tax liabilities, obligations and entitlements under any taxation law
What must tax agents hold?
AFS license in giving financial advice.
Are consumers and businesses likely to have different views about the term financial advice?
Yes.
What are four terms about financial advice?
Financial product advice, credit advice, non-financial product and tax advice.
What is advice?
Speaking to someone more knowledgable than you about an issue and receiving a recommendation.
Whose primary business is financial product advice?
Financial planners.
The definition of a ‘financial product’
and what constitutes ‘financial product advice’ is contained in the Corporations Act 2001
(Cth) (Corporations Act).
Who can give financial product advice?
Either licensed with the ASIC and meet disclosure and
conduct requirements, or be an appointed representative (usually an individual) who acts for or by arrangement with a licensee
What legislation defines financial product?
Corporations Act 2001 (Cth)
What legislation defines what constitutes financial product advice?
Corporations Act 2001 (Cth)
What is credit advice?
It is advice about borrowing money.
How can people/businesses borrow money?
Loan, lease or other financial product.
Who can provide credit advice?
Representative of an authorised ADI, mortgage broker or finance broker.
Who can provide credit advice?
Anyone providing credit advice must be licensed with ASIC and meet disclosure and conduct requirements,
or be a properly appointed representative.
What is non-financial product advice?
Advice that is not financial product advice or credit advice.
Is real property a financial product?
No.
Who regulates property advice?
States and territories.
Is health insurance a financial product under the corporations act?
No.
What does health insurance not being a financial product mean?
Anyone can provide advice on it.
What is tax advice?
Advice about tax legislation, including the tax aspects of superannuation.
Who must people providing tax advice be registered with?
TPB.
What must people providing tax advice meet?
Disclosure and conduct requirements.
When did the government begin introducing legislation to protect consumers?
1980s
When did ASIC become responsible for monitoring and protecting market integrity and consumer protection?
1999.
What organisation plays a similar role to ASIC?
ACCC.
How are ASIC and ACCC similar?
Both are concerned with members of the public and small businesses who have information asymetry.
What is information asymetry?
Provider has more knowledge than the consumer and the consumer is at a potential disadvantage.
Can information asymetry be disatrous when it comes to financial products?
Yes.
What does the consumer protection do about licensing?
Financial service providers must be licensed and meet capability standards.
What does the consumer protection scheme do about financial service providers being competent?
Financial service providers must be competent.
What do consumer protection schemes do about standards of conduct?
They must meet standards of conduct.
What does the consumer protection scheme do about disclosure documents?
Consumer must be provided disclosure documents.
Why must consumers be provided with disclosure documents?
So they can make informed decisions about recommendations.
What do consumer protection schemes do about dispute resolution?
Financial service providers must provide dispute resolution services and be able to compensate consumer who suffer financial losses.
What is financial planning?
The process of developing strategies to help clients manage financial affairs.
What are the advantages of clients managing their financial affairs successfully?
Build wealth, be financially secure and achieve lifestyle goals.
When did financial planning begin to evolve?
Late 1980s.
What drove the evolution of financial planning?
Regulatory changes and the need of consumers.
Was deregulation a main factor in the evolution of financial planning?
Yes.
Was the growth in the range of financial products and financial service providers a main factor in the evolution of financial planning?
Yes.
What change in superannuation lead to the evolution of financial planning?
Compulsory superannuation.
Did technological changes lead to the evolution of financial planning?
Yes.
Did an increase in the wealth of Australians lead to the evolution of financial planning?
Yes.
DId consumer protection regulation lead to the evolution of financial planning?
Yes.
Has the definition of financial planning evolved over time?
Yes.
What are two types of financial planning?
Holistic / scaled or limited.
What is holisitic financial planning?
Considered a clients total personal and financial circumstances and makes wide ranges of recommendations.
What is scaled or limited advice?
Where the advice only considers one or more of the clients needs or objectives.
Why has the industry consolidated over time?
Increasing complexity.
What are most financial planners now linked to?
Four major banks.
Does Australia have an internationally regarded system of regulating the financial sector?
Yes.
Who is ASIC?
Australia’s corporate, markets and financial services regulator.
In terms of financial services, ASIC regulates:
• businesses and individuals who provide financial advice, including financial planners,
stockbrokers, life risk advisers and insurance brokers
• businesses that manufacture financial products, such as investment managers,
superannuation funds, life and general insurers and approved deposit-taking institutions
• businesses and individuals who provide consumer credit advice,
such as mortgage and finance brokers
• businesses that provide consumer credit, such as loans, leases and finance
• trading on Australia’s domestic equity, derivatives and futures markets,
such as the Australian Securities Exchange (ASX)
• authorised financial markets, to ensure they are complying with their obligations to
operate in a fair, orderly and transparent manner.
ASIC maintains publicly available registers of the entities it regulates.
These include a register of:
• companies
• business names
• persons
• banned and disqualified persons.
The register of professionals includes financial service licensees, financial advisers,
credit licensees, credit advisers, auditors and liquidators.
What is ASIC
Its aim is to
contribute to Australia’s economic reputation and wellbeing by ensuring that
Australia’s financial markets are fair and transparent, supported by confident and
informed investors and consumers.
