PS146

ASIC (Australian Securities and Investments Commission) policy statement - relating to the provision of financial product (sometimes Structured investment products) advice.

Policy Statement 146 (PS146) was introduced under the Financial Services Reform Act 2001 (FSR Act). PS146 prescribes adequate levels of training, competence, and experience for those seen to be giving financial product advice to retail investors. It is a clear example of how ASIC works to protect so called 'mum & dad' investors.

Under PS146 an adviser can be categorised in one of two ways. Firstly, there is the category of providing General financial advice. Secondly there is the category of providing Personal financial advice. General financial advice is categorised as Tier 2, and Personal financial advice is categorised as Tier 1.

To put it simply, if an adviser is considering your own personal financial position (ie. he/she is aware of your personal financial position, your personal financial aims and needs, and is recommending a product to deliver you with optimal value) when recommending a financial product to you, then that is Tier 1 advice. However, if an adviser is simply talking about the benefits of a product without any personal reference to any client (ie. he/she may be marketing a new financial product through the media, or a presentation to a group of different investors) then this is categorised as Tier 2 advice.

Generally (there are some exceptions to this rule) a Tier 2 adviser will be in a position to sell large quantities of a financial product downstream to Tier 1 advisers. The Tier 1 advisers will then on-sell the product in smaller quantities to his/her clients who he/she believes would have the most to gain from this particular product. For this reason investment banks generally concentrate on having a retail sales team for financial products consisting exclusively of Tier 2 advisers. By doing so, they reduce the number of transactions (because each transaction is of greater worth) and sell their product down-stream much faster.

Tier 1 compliance is harder to gain than Tier 2 as it takes into account individual's positions (which by their nature are diverse). Tier 1 requires two examinations, Tier 2 requires one examination.

Tier 1 advice is divided into three categories: Managed Investments (see collective investment scheme) and Securities, Life Insurance, and Superannuation. An adviser can either choose to study these individually or in succession as part of the Diploma of Financial Services (Financial Planning). Whichever the adviser chooses to do he/she must ensure that they are PS146 compliant for the knowledge area they specialise in.

There are many quality providers of PS146 compliance training. It is quite common for training to be conducted online, and a quick search on the internet will reveal a number of service providers offering Tier 1 and Tier 2 training.

Related Pages

*Financial planner
*Certified Financial Planner