Credit and financial planning: a perimeter review for advice practices

Credit can arise naturally in a financial planning relationship. A client may ask about refinancing, debt repayment or borrowing capacity during a broader discussion about cash flow, investment or retirement planning.

The regulatory answer cannot be determined from the label attached to the service. It depends on what the business and its people actually do, which entity performs each step, and whether the National Consumer Credit Protection Act 2009 or an exemption applies.

This is a practice review rather than a response to a new ASIC announcement. The starting point is the legislation and ASIC's guidance on credit licensing, credit representatives, competence and training.

Start with the activity, not the product

The National Credit Act generally requires a person to hold a credit licence if the person engages in credit activities, subject to the Act and applicable exemptions. The Act defines credit activity and credit assistance, including circumstances in which a person recommends that a consumer apply for, or remain in, a credit contract, or assists the consumer to do so.

Those provisions make the conduct important. Calling an interaction a referral does not determine its legal character. Nor does the fact that the same client is also receiving financial planning advice.

The relevant provisions are in Part 2 of the National Credit Act, including sections 6, 8 and 29. ASIC's Regulatory Guide 203, *Do I need a credit licence?*, also explains that the answer depends on the activities being conducted and any applicable exclusion or exemption.

A practice should therefore describe the proposed service in operational terms. For example:

• Is the adviser providing factual information only?
• Is the adviser introducing the client to another business?
• Is the adviser recommending that the client apply for, refinance or remain in a credit contract?
• Is anyone helping the client complete an application or otherwise obtain credit?
• Which entity receives the client, collects information, compares options or communicates with the lender?

These questions do not replace legal analysis. They create a sufficiently precise factual record for the licensee, compliance team or legal adviser to assess the position.

An AFS licence is not the whole analysis

Holding an Australian financial services licence, or being authorised under one, does not by itself resolve whether a person or entity may engage in a separate credit activity. The credit licensing question must be considered under the National Credit Act, including its licensing provisions, representative provisions and exemptions.

That is not a conclusion that every credit-related interaction requires a separate credit licence. The outcome may depend on the activity, the capacity in which the person acts, the relevant consumer and the terms of an applicable exemption or arrangement with a credit licensee.

ASIC's Regulatory Guide 203 should be read alongside the legislation. ASIC also provides guidance on applying for and managing a credit licence in Regulatory Guide 204, and on competence and training in Regulatory Guide 206.

For a practice, the immediate governance question is whether its proposed operating model has been mapped against those requirements before the service is offered to clients.

Referrals need a fact-based assessment

A referral may be only an introduction, but the practice should not assume that every referral has the same regulatory treatment. The facts may change if the adviser recommends a particular credit outcome, compares credit options, gathers information for the purpose of obtaining credit, assists with an application or remains involved in the credit process.

The examples below are prompts for assessment, not legal conclusions. Statements such as “you should refinance”, “this loan is suitable” or “you can afford this borrowing” should be reviewed in context. The surrounding conversation, the information used, the action taken and the role of each entity may all be relevant.

A proposed referral process should identify:

• the point at which the financial planning service ends and the credit service begins;
• the entity responsible for the credit service;
• the role of each person who speaks with the client;
• whether any person is acting as a credit representative;
• the information that is collected and why;
• what happens after the introduction.

The National Credit Act contains specific provisions dealing with credit representatives. ASIC's credit licensing guidance should be used to assess the relevant arrangement rather than relying on an informal description such as “introducer” or “referral partner”.

Suggested practice controls

The following are governance recommendations, not a complete statement of legal obligations.

First, create a service map. Record each point at which credit may arise, including fact finding, strategic advice, implementation, referrals and reviews. For each step, record the proposed wording, action, entity and person responsible.

Second, obtain a documented assessment of the licensing position. That assessment should identify the relevant credit activity, the proposed licensee or credit representative, and any exemption being relied on. If the practice intends to provide credit services itself, ASIC's credit licence application material is the appropriate starting point. If it intends to rely on another business, the agreement should clearly allocate responsibility for the credit service and client communications.

Third, test the process against real files. Reviewing file notes, client communications, referral records and, where lawfully available, recorded calls can show whether actual conduct matches the documented model. This is a recommended monitoring control, not a direction contained in the ASIC portal material.

Fourth, review remuneration and conflicts. The practice should determine what each party receives, how that is disclosed where required, and whether the arrangement creates a conflict that needs to be managed under the obligations applying to the relevant entity and service. The precise disclosure and conflict requirements should be checked against the applicable legislation, licence conditions and guidance.

Fifth, set an escalation rule. Advisers should know when to stop discussing the credit issue and refer the matter to the appropriately authorised person or entity. A script can assist, but it should not be treated as a substitute for assessing the conduct actually taking place.

Check authority and competence separately

Authority and competence are different questions. A person may need the appropriate representative or employment arrangement for the activity, and the relevant licensee may also need to satisfy competence and training requirements.

ASIC Regulatory Guide 206 addresses competence and training for credit licensees and credit representatives. Practices should use that guidance, the National Credit Act and the relevant licence arrangements to determine what applies to the people involved. General financial planning professional development should not be assumed to satisfy a credit‑specific requirement without checking those sources.

ASIC's Professional Registers provide an official way to search information about Australian financial services licensees, credit licensees and credit representatives. The register should be checked as part of the review, while recognising that a search result does not replace examining the scope of the relevant authorisation or contractual arrangement.

A short review before launch

Before adding a credit service or referral pathway, practice owners and responsible managers should:

• describe each proposed activity in plain operational terms;
• identify the legal entity and individual responsible for every step;
• assess the National Credit Act licensing, representative and exemption position;
• verify the relevant credit licensee or representative through ASIC's Professional Registers and the underlying arrangement;
• review scripts, referral documents, remuneration and conflict processes;
• confirm the applicable competence and training requirements;
• sample actual client interactions after launch.

The key issue is not whether credit appears in a financial planning conversation. It is whether the practice can show, from the facts, which service it is providing, under whose authority, and how it will keep that boundary under review.