Most of the legislative changes that came out of the first tranche of advice reforms have already come into force, but the one-year anniversary of Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act receiving royal assent brings with it one final deadline.
Under Schedule 1, Part 5 of the DBFO Act, anyone who provides personal advice to a retail client about “certain life risk insurance” products and receives a commission in connection with the issue or sale of that product is required to obtain the client’s informed consent before accepting the commission or it will be conflicted remuneration.
Speaking on an Acenda webinar this week, Financial Advice Association Australia (FAAA) general manager of policy, advocacy and standards Phil Anderson explained that the obligation “applies with respect to business that is issued or sold from 9 July”.
“You need to be conscious that if it takes four weeks to underwrite … the clock is ticking now,” Anderson said.
“Some people are doing it as part of their authority to proceed, some people are doing it as a stand-alone, separate document. It is now essential that you have it, because in the absence of it, the payment of the commission is considered conflicted remuneration.”
Clarifying the rules, he added that it only applies to new clients from 9 July forward, meaning that existing clients are not involved. This exemption also applies even if an adviser has acquired a book of clients.
“The existing consent that’s been obtained in the past meets the requirements, and you’re not required to provide these life insurance client consent forms to the life insurers,” Anderson said.
He also noted that, in many cases, risk advisers have already been obtaining client consent for the payment of commissions through the signing of an authority to proceed. However, this was not previously a legal requirement.
“A lot of advisers would not appreciate, necessarily, that the authority to proceed is not a legislated document or a legislated part of the statement of advice. It’s practice. It’s something that’s grown over time, and more or less details get into the authority to proceed page,” Anderson added.
“Now we’ve got an outcome where it’s a legal requirement to get the client to sign something to confirm that they are providing informed consent to the advice that they’ve received in the remuneration and commissions that will be paid as a result.
“So, I think it’s not a big change, but it’s an important change, and I do think it’s important to have that outcome where clients are providing informed consent. It was part of the code of ethics. An interesting part of the code of ethics also is the suggestion that informed consent was required from existing clients.”
Importantly, he added, there is no requirement within the legislation for insurers to actually see the consent forms.
“ASIC’s provided guidance, it’s called info sheet 292, so it’s worthwhile having a look at that,” Anderson said.
“We’ve had some discussions with ASIC about the clarity of some of the messages in there. We particularly objected to the discussion around that life insurers might need to see these consent forms. The law does not require that, and we don’t expect the life insurers to be asking for visibility of that.
“There’s a few things in that guide that we thought could be clarified, but it’s out there, and it’s worth risk advisers understanding what the regulator expects.”
Remind me again how many so called smart people have worked on making our job less onerous over the years,
Then look at the reality of what has been achieved over the past few years,
The only change here on the ground is we have more paperwork that clients won’t read that we have to tack on,
Do clients really need to be told 3 times that we will get paid for our work?
All this extra compliance just assumes everyone is too stupid to realise people get paid commission to sell stuff, which is far from the truth.
Do car sales people disclose commission?
Do asic workers disclose thier bonus payments to those that pay thier fees? Ie us.
Of course not, but again we are expected to be perfect people that disclose what colour undies we have on even though the clients not interesfed
So twisted
This will encourage even more advisers to devote a lot of time and effort towards risk insurance.
There seems to be a lot of information about this however no clear explanation of what is needed or involved in relation to the process??