In a statement released on Monday, the association referenced its 2019 member survey, which found that 61.4 per cent of FPA members agree that the cost of regulation was the biggest current challenge in the industry, up from 54.6 per cent of members in 2018.
At the same time, 41.4 per cent of members said reducing the cost of providing advice would be a major challenge, up from 25.3 per cent in 2018.
FPA chief executive Dante De Gori said the data provided important context to government regarding the implementation of royal commission recommendations.
“What our members are telling us is that the cost of regulation and time constraints have become a major issue for them and their business,” Mr De Gori said.
“While we broadly agree with the draft legislation on the royal commission recommendations, we do have real concerns for both the profession and consumers who we are seeking to serve.”
As a result of this, the association recommended to government in its submission regarding royal commission legislation that financial planners be able to renew ongoing fee arrangements with clients up to 90 days before the notification date without resetting the anniversary date of the agreement, and be allowed a 12-month rather than six-month period to transition pre-FOFA clients.
“We strongly advise government to appreciate the time financial planners require to adhere to these recommended reforms while also seeing their clients, meeting their education requirements and running their businesses,” Mr De Gori said.
The association also expressed its concern around draft legislation released by government to stop consumers paying for advice through their MySuper account, arguing it would restrict access to affordable advice.
“It is incorrect to say that people with MySuper are disengaged and do not require advice. Many people choose to stay in a MySuper investment option because it is the right one for them and they have the same need for financial advice on their superannuation, insurance needs and retirement planning,” Mr De Gori said.
“Stopping the payment of advice fees from MySuper investment options will disadvantage many Australians who currently use this arrangement to access affordable advice from their choice of financial planner.”
The FPA also said the proposed compulsory reference checking scheme for planners as per recommendation 2.7 of the commission should be extended to include supervisory staff and responsible managers.
“This recommendation will support the growth of the profession by preventing bad apples from moving around the industry, however, there is a risk that those who don’t provide financial planning services but have influence over the financial planning process can move freely around the sector,” Mr De Gori said.
In addition, the association recommended the government simplify proposed new breach reporting requirements for licensees by removing the 1 April 2021 transition deadline, and said it supported the requirement for advisers to disclose to clients when they did not meet the definition of independence under the Corporations Act.
Given that advisers now need to drown clients in constant, detailed fee disclosure, perhaps this is an opportunity to really spell out to clients how much of their fees relates to regulatory costs. In my case I estimate it’s at least a third, including the amount of labour time spent on regulatory matters. So a typical fee statement might look like…
My ongoing advice and administration assistance: $2,000
Government regulatory overhead: $1,000
GST: $300
Total: $3,300
That’s a great idea,
STRANGULATION BY BS REGULATION is so bloody expensive, the pollies have zero idea about reducing Red Tape Regs only ever adding more and more and more BD Regs and useless costs