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ISSUE 7.19 October 2010
Conflict confusion spurs disclosure calls
St.George shake-up
Steven Heavey explains commission cut surprise
Conflict of interest
Page 2
obligations face industry challenge
Brokers are at the mercy of an “excessive” conflict of interest clause under the new NCCP regime, which remains “a hard test to satisfy” and leaves brokers exposed to potential legal action from aggrieved consumers who suffer any financial disadvantage. Ray Hair, chief executive of PLAN Australia, said brokers should seek to protect themselves through disclosure and clear documentation of advice, though that “does not discharge their obligation, and still leaves them potentially exposed to subsequent action by the consumer”. Under NCCP, a broker is required to ensure a consumer is not disadvantaged at all by any conflict of interest on the part of the broker – a clause designed to protect consumers against entering into a credit contract that may result in financial hardship. However, Hair said the legislative burden is not fair and reasonable, provides no clear guidelines on what constitutes a conflict, and is tougher than the Financial Services Reform (FSR) regime governing financial advice. “To me it seems to be excessive – a hard test to satisfy.” Under FSR, potential conflicts are handled through disclosure, sufficient to allow the customer to assess conflicts and act accordingly.
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AMAs award success The best brokers, BDMs and service providers named and acclaimed Page 6
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Inside this issue
Ray Hair
CreditWise director Kate Keating said financial planners were “fortunate” they were able to manage conflict through disclosure. “The NCCP regime did not follow the same approach. It says starkly the conflict of interest must not exist if it leads to consumer disadvantage.” Hair has called for more clarity and guidance from the new credit regulator, and argues that a move toward a disclosure regime could ease the current conflict of interest burden. “I would prefer to see a
level of definition around what are potential conflicts and (possibly more importantly) what is generally not considered to be a conflict,” he said. “Perhaps some combination of guidelines from ASIC and disclosure requirements on the part of the broker would provide protection to the consumer and certainty or confidence to the broker.”
Viewpoint Deconstructing ASIC Insight Tiffen and Forsyth tips Market talk Population and property Toolkit Fixed rate fixation? People Higgins at the top... again Caught on camera
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Viva Las Vegas at the AMAs Insider
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The broking ABC and D
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