Assignment
 
Q1.
Financial product advice, as far as I’m concerned, is an issue of opinion stating recommendations about financial products investments. This advice is designed to influence its client’s decision regarding to forming financial products related investment portfolios or investment strategies. Importantly, the client can reject these recommendations. Financial product advice consists of personal advice and general advice. When issuing personal advice, the provider has to consider specific requirements of clients and recommend the proper products to fulfill clients’ needs. Those requirements may include, for example, expected return, risk preference, expected investment cycle –-- long-term or short-term investment, savings, income and so on. In contrast, rather than being designed for a specific person, general advice is focusing on product. This kind of advice does not consider personal needs, but analyzes different characteristics of different products. Based on the information of individual products, customers can make decision to make an investment. Under chapter 7, licensee must fulfill obligations to comply with all kinds of standards and regulations, including Corporation Act and regulations, financial services laws and International Accounting Standards. Licensee must also meet the AFS license obligations and file FS 71/71 Annual Audit Report. For authorized representatives, besides the main obligation to comply with the financial services laws, they have also to fulfill other compliance such as the disclosure obligation, Best interest duty, hawking prohibition.
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Q2.
i. Scaled advice is personal advice that is limited in scope. While personal advice providing comprehensive recommendations that consider all personal requirements of clients, scaled advice take some crucial aspects of those requirements into consideration. Factual information is made up of only facts about interested financial products. For example, on 04/08/2014 a married man came to a financial advice company looking for suggestions to make a decision among some financial products: securities, contrast of insurance, basic deposit products and superannuation. When giving personal advice, provider should ask this about his target returns, risk preference, wealth information, family condition, income, savings and other personal needs and information. Based on the information, the provider can issue a statement recommending proper financial products or investment strategies that fulfill this person’s requirements. When giving general advice, the provider will give a detailed description of characteristics of each financial product the man interested in and comments, including the provider’s opinions about which product is safer or which product can earn higher returns while bear low risks. When giving scaled advice, provider will only take care of important information such as the person’s goals or expected returns, personal and financial information and risk preference. Given this kind of information, provider can give advice and explain why it’s proper for the man. When giving factual information, provider will give a list of only basic facts about each financial product, including their returns, maturity, etc. The provider will not give any comments about the interested products and the man will decide his investment strategy based on those facts.
ii. Licensees are required to give retail clients a Financial Services Guide (FSG), no matter giving personal or general advice, when providing financial product advice to make sure that retail clients receive crucial information about the services offered. When providing a personal advice, a Statement of Advice (SOA) and Product Disclosure Statement (PDS) of Short-Form PDS should be prepared by the financial adviser for any product recommended. When providing a general advice, besides FSG, a general advice warning should also be prepared.
 
 
Q3.
In 2008 and 2009, affected by the global financial crisis many high profile corporates such as Raptis Group, Srotm Financial, Lift Capital and Asset Loan Group collapsed in Australia. The investigation of those collapses shows that government should issue more regulations to improve the financial advice market. Therefore, the government announced to remove the accountants’ exemption and replace it with a new conditional regime for professional accountants ---limited AFSL. As far as I’m concerned, a limited AFSL is a form of simplified AFSL which will expand the provision of financial advice to individuals as well as small business. Limited AFSL will give accountants the permission to provide a more broad range of advice on SMSF. This new form of license can provide financial advice for more people in Australia because the licensees can also give advice on basic deposit products, general and life insurance, securities, and simple managed investment schemes. However, the licensees are not allowed to issue recommendations about specific product while they can provide more strategic financial advice to clients. For example, a licensee can recommending an investment strategy investing in basic deposit products, securities, general and life insurance and simple managed investment schemes after analyzing client’s needs. From the viewpoint of providers of financial product advice, the pros of having a limited AFSL include they can receive a much broader range of clients, they can bear lower responsibilities and they can promote more varieties of products (SMSF) and so on. The cons of having a limited AFSL include they can’t promote a specific financial product and it will cost them more while receive comparatively less to give advice. As part of the FOFA reforms, the exemption that allows accountants to provide advice on the establishment of SMSFs without the need for an AFSL is removed. Therefore for accountants who want to continue to offer advice on SMSFs, they should consider to apply for a limited AFSL.  
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