Advisers will need to have a clear understanding of the perimeters of client contracts under FOFA, said one expert in response to concerns from industry bodies that opt-in could expose advisers to litigious action from clients who failed to return paperwork.

The concern that advisers may be liable if clients suffer a disadvantage after failing to return opt-in paperwork within the allotted time surfaced in evidence from both the Association of Financial Advisers and the Financial Planning Association to a parliamentary hearing this week. 

The real issue for advisers in the draft legislation will be how advice services are linked to administrative and other services, according to Richard Batten, partner in Financial Services at Minter Ellison.

"You have advice and you also have dealing, execution and administration services that potentially are wound up in the same single bundle of services," Batten said.

"The opt-in regime is about the provision of advice. Receiving notices from product issuers and acting on or passing on those notices is not advice."

Where an adviser provides execution and administration services to a client in addition to advice, if there is only one arrangement covering all those three areas of service, there is a potential for the entire arrangement to be caught up in the opt-in provision, Batten said, affirming the basis for the industry expressions of concern.

"It may be possible for an adviser to separate out those three streams and have the compulsory opt-in for the advice component and to provide other services without necessarily being part of the opt-in arrangement," said Batten.

"That whole area is unclear and we'll need to get some further guidance as to exactly what should occur in those situations."

As it sits at the moment, there is the potential for clients to be disadvantaged should they fail to opt-in due to oversight in cases where the adviser is taking on a relatively high level of responsibility in execution and administration services. This makes some of the AFA and FPA concerns justified, though organisations "need to be real," according to Batten in terms of the actual extent of possible losses that could be incurred.

Ultimately, it is the extent to which compulsory opt-in requirements for advice can be tied to or separated from other services delivered that will be key to an adviser's individual liability. Clarity on that point is something the new legislation is yet to provide.