Almost a year on from the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act receiving royal assent, advisers are now being reminded to prepare for new clients’ consent legislation coming into force in just a few, short weeks.
Under the new rules, in order to avoid a conflicted remuneration accusation from regulators, anyone who provides personal advice to retail clients regarding “certain life risk insurance” products and receives a commission off the back of issuing or selling that product will be required to obtain clients’ informed consent before accepting the commission.
Even so, Risk Hub founder Marc Fabris said most advisers are likely already fulfilling the requirements set to be introduced in July, with the legislation simply introducing “more of a tightening of documentation standards than a process overhaul”.
Those who are – and in fact all advisers should be – disclosing commissions in client statements of advice (SOA), getting signed or digital consent through an authority to proceed (ATP) or implementation form and keeping those records properly, already meet most of the requirements.
However, to ensure they are compliant under the new standards, Fabris said advisers will also need to include, whether as part of the SOA or in a separate form, the insurer’s name, the commission rate and frequency of payment, any services provided in relation to the commission, a legal statement that commissions cannot be paid unless the client consents and a statement that the consent, once given, is irrevocable.
“In most instances, licensees have already provided (as you’d hope) their advisers with a stand-alone consent template, as well as updated wordings for SOA ATPs so they can obtain appropriate consent within that,” Fabris told ifa.
“In most cases, the way advisers are providing information around services, recommendations and commissions – don’t require drastic change, just some modification to wording and inclusions.”
Despite this, Fabris noted that there are some aspects of the legislation that advisers are still uncertain about.
“There’s been some concern around the requirement to specify the services being provided for the associated commission, but importantly, what’s required are the ’nature’ of services to be specified,” he said.
“So, what I’ve seen is a move to under-promising to keep on the safe side.”
Although the changes are relatively small and the deadline doesn’t hit for another few weeks, due to processing times on applications and underwriting, Fabris said this is not something advisers can just start implementing once the legislation has commenced.
“It’s important to realise that it’s not just applications submitted/issued from 9 July that are impacted but those being recommended or applied for now that might be issued after that date. That’s where the stand-alone consent form would be useful,” he said.
While there is often push back among advisers when it comes to introducing more paperwork or administrative tasks, no matter how minor, the legislation does permit verbal consent to be utilised, though only under specific conditions.
In order to utilise this allowance, the verbal consent must be recorded, whether that be audio or written, and the client must be provided with a written summary of what they consented to with records of this being kept and stored securely for seven years.
“Overall, I see this as an unfortunate additional burden being placed on what’s already a burdensome process. Is any extra value being added for clients as a result of these changes? Unlikely,” Fabris said.
“But the government would argue that it’s putting clarity around what’s not been properly regulated, even if it’s been good practice by advisers.”
Speaking on an Acenda webinar last week, Financial Advice Association Australia general manager of policy, advocacy and standards Phil Anderson said that while this isn’t a big change, “it’s an important change” and brings into legislation something that had already been part of advisers’ standards practices for some time already.
This is more absolute political lunacy to be adding yet another layer of unnecessary difficulty and choke point in the process by idiot bureaucrats justifying their existence at the trough. Fabris has called this correctly. When will it all stop? I’d say about December 2026 when all the risk specialists have sold up and left for greener, easier and more appreciative pastures.
Like most things people are jumping at shadows and making this much bigger than it probably should be. In saying that ASIC will undoubtedly destroy someone’s life because they didn’t mention the consent is irrevocable whilst ignoring people that provide personal advice without an SOA on the basis that they claim to be providing general advice.