The Financial Services Council has made several recommendations on the supervision of advice licensees following the failures of the Shield and First Guardian investment schemes.

However, advisers have indicated they are against the FSC proposals.

“It’s important to be aware of the context of these recommendations,” Financial Advice Association Australia CEO Sarah Abood said.

“The FSC does not represent financial advice, or financial advisers. It represents the interests of five large advice licensees, with the vast majority of its membership being made up of large product issuers (such as managed investment schemes).

“Its proposals should be considered in this light.”

The FSC recommendations include improved use of existing licensing, registration and enforcement powers, and more active oversight of professional indemnity insurance by the Australian Securities and Investments Commission.

“ASIC must be equipped with the information, resources and supervisory capability to identify and address risks before consumers suffer harm,” council CEO Blake Briggs said.

“The solution is not new laws but more effective administration and supervision of the existing licensing framework, so that licensees are more rigorously held to account in fulfilling their statutory duties to consumers.”

The FSC makes the recommendations in a white paper on the future of advice licensing.

On PI insurance, the paper says ASIC does not currently examine whether a licensee has cover that is appropriate for its risk profile and potential claims exposure.

The council has proposed PI adequacy be embedded into annual licence renewal and ongoing supervision.

“Licensees should provide ASIC with their current PI policy, including relevant schedules and endorsements, and ASIC should have regard to whether the arrangements remain adequate for the nature, scale and complexity of the business,” the paper says.

Mr Briggs says the white paper does not seek to impose an unnecessary burden on the thousands of advice businesses that consistently meet their obligations.

“Instead, this paper proposes a supervisory approach that focuses regulatory attention where it is most needed, while maintaining a meaningful minimum level of engagement with every advice licensee.”

FAAA’s Ms Abood says the peak body will “carefully” review the FSC’s proposals. “However, we expect they will not be well received by smaller advice licensees who would be hit hard by increased regulatory intervention and ASIC costs under the proposals.”