Under the new rules, dictated by the Financial Services Legislation Amendment Bill, licensed financial advice providers (FAPs) will be able to have nominated representatives working for them.

These representatives will not have to be licensed and the FAP will have liability for their compliance.

In a recent update, the financial services team at law firm Kensington Swan said there were still a lot of questions about the nominated representative classification.

“This is the new regime’s equivalent of a QFE adviser. They don’t need to be registered in their own right, but must operate under the umbrella of a financial advice provider licence,” they said.

“Concerns raised in the consultation process about the lack of transparency and individual accountability of this group have not been addressed. Nominated representatives will be neither civilly liable for contraventions nor liable for regulatory disciplinary action or penalty. The onus will fall on the financial advice provider to make sure nominated representatives behave.”

PAA chief executive Rod Severn said there was a lot of clarification required.

“We have argued all along that no matter who you are, if you are giving advice, you need to be accountable. Regardless of what you are called, advice is advice and that advice can either set you up for a better future, or ruin you,” he said.

“The public need a response and a plan from the regulators and providers that clearly spells out the differences between what an adviser can offer and what a nominated representative can offer. One is choice, the other not so much."

His counterpart at the IFA, Fred Dodds, agreed.

“This will certainly highlight the need for very transparent disclosure to a client right at the outset and it will be fascinating to see the 'wizardry' with words that will be possibly concocted to paint a picture of someone who is able to give regulated financial advice and comply with all of the sections 431H to 431O but not be liable.”

Lawyer Sue Brown said she did not think that there was automatically a problem due to a lack of accountability. But the detail of the rules was yet to be seen.

She said there was potential for confusion when it came to complaints. Nominated representatives are not required to be members of an external disputes resolution scheme under the new structure.

“How that works in practice I don’t think is yet understood.”

She said it would be the representatives who gave advice and knew their way around the paperwork, and would know what they took into account with clients.

Susan Taylor, chief executive of dispute provider FSCL, said her organisation was still working through the ramifications.

“There's also a provision in the bill that financial advisers won't have to be a member of a scheme, provided that the FAP they're engaged by is a member of a scheme. That is – presumably - because the FAP will have to assume responsibility and liability for any complaints that may be made against one of their advisers. This was a new addition to the bill.”

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