The government has released the first tranche of draft legislation for its Delivering Better Financial Outcomes package of reforms – a package aimed at reducing red tape, as highlighted by Minister for Financial Services Stephen Jones.
But while the initial draft legislation adopts around half of the recommendations of the Quality of Advice Review (QAR), noticeably absent are recommendation five, proposing the elimination of safe harbour steps from the best interests duty, and recommendation nine, advocating for the substitution of the lengthy and legalistic statements of advice (SOAs) with a financial advice record for consumers that is more fit for purpose.
Among the recommendations that made the first cut are recommendation seven, which clarifies that funds are allowed to pay a member’s financial advice fees from their superannuation account, recommendation eight, which consolidates different ongoing fee consent documents into one simplified document, and recommendation 10, which allows more flexibility in how financial services guides are provided.
Also included in the first batch of draft legislation are recommendations 13.1 to 13.5 which clarify that monetary or non-monetary benefits given by a client are not conflicted remuneration, and recommendations 13.7 to 13.9 which introduce written consent requirements for consumers before they purchase an insurance product that will result in a commission payment.
In a statement on Tuesday morning, the Financial Advice Association Australia (FAAA) welcomed the release of draft legislation but noted its concern regarding the exclusion of changes to SOAs and safe harbour.
“We are concerned that the rationalisation of statements of advice and the removal of safe harbour steps from the best interests duty have not been included in the draft legislation at this time,” said FAAA chief executive officer Sarah Abood.
“These are important elements in cutting unnecessary red tape and have the potential to meaningfully reduce the cost of providing advice.
“We will be seeking further clarification from the government on the timeframe for these measures.”
Similarly, Peter Johnston, executive director at the Association of Independently Owned Financial Professionals (AIOFP), said in a statement: “Whilst we are pleased it’s a step in the right direction but it is missing the point around the cost of advice that needs to be immediately addressed, which is disappointing”.
“SOA’s are unwieldy, expensive and most of them technically in breach of the Corporations Law around transparency and simplicity for consumers,” Mr Johnston opined.
“The consent forms were put in place to control the bank executives and their fee for no service fiasco, they are long gone but advisers and consumers are lumbered with this unnecessary, frustrating and expensive paperwork. The minister should note that consumers see no need for them.”
Recommendation 8 applauded
For the FAAA, the inclusion of recommendation eight stood out as the winner, with this particular aspect of the legislation set to consolidate ongoing fee consent requirements to a single standard consent form.
“Delivering on this recommendation will save many hours of frustrating, inefficient, and unnecessary work for both advisers and their clients and we are very happy to see this included in the first tranche of legislation,” Ms Abood said.
Another piece of important news for the FAAA’s members is confirmation that commissions on life insurance can continue to be paid to advisers, with a one-off written consent from the client before the beginning of the policy.
The FAAA also welcomed the government’s commitment to announce its final position on the outstanding recommendations of the QAR before the end of the year, with further legislation to be released in 2024.
“We are keen to see the government move quickly on the remaining recommendations to eliminate the remaining unnecessary red tape and ensure we can expand the availability and affordability of financial advice for all Australians. It is also important we see a quick turnaround on this draft legislation so real reforms are implemented as soon as possible,” Ms Abood said.
“The FAAA will respond fully to the draft legislation later this week with an update to members.”
The government is currently consulting on the draft legislation with feedback welcome until 6 December.
Playing advisers on a break again. Associations do not know how to play the game. Lambs to the slaughter.
Not too hard to pick the agenda here.
And how about all of those advisers who were pinged in the past with EUs or bans for doing what was in their clients best interests by simplifying and consolidating statements etc as above now allows?
Stephen Jones was right when he was consulting with industry. He meant the Industry Super funds, given that who will be the only beneficiaries of any of these changes.
Surprised?? Nah not really.
Hope Michelle Levy wasn’t paid much since none of her recommendations other than allowing vertical integration within superannuation were ignored. Realistically I struggle with the concept that a superannuation fund is less conflicted in this matter than a bank. Jones has managed to do nothing except gets a lot of lunches and breakfasts paid for when he was “reviewing his options”.
I’m sorry guys, but to a large extent I believe the SoA should stay. Perhaps the client only needs the executive summary or a slightly expanded version of it, but the adviser needs to have the full document on record.
But nothing is changing so your belief is redundant. 1000s of submissions in the interim and final report were issued for a reasonable compromise. The SoA is not being removed anyway so your view is far from contentious. Ultimately it doesnt matter what you, or the Associations or Levy or the Pub Test or most importantly CLIENTS want, nothing has changed or likely will
Yes, we need a 2 page Customer Advice record (ala early 1990s) which records the recommendation & the cost. That is about as much SoA that we need.
After reading the explanatory statements it can be best summarised as “Shuffled some chairs on the Advice Titanic.”
The biggest impost on Advice firms would have to be “anniversary dates” “renewal periods” the “120 days, 60 days 10 days 150 days..” the whole monitoring of that, having systems to follow it up etc, not to mention an inability to get a document signed on Monday due to the anniversary date being Tuesday.
As for Fee Consent the draft explanatory document states that Super funds won’t need to follow it, and most likely won’t implement it due to their own “systems” …so never going to happen in reality. The only super funds that will implement it will be CFS, BT Hub 24. The rest of the industry no chance.
Providing more ammunition to enable Super funds to knock back Advice fees, and also clearly stating Advice fees from Super must be directly related to the member portion is not lowering costs or increasing access to advice.
In short this has done nothing.
Your point regarding anniversary dates and renewal dates is so true. It looks so inefficient when a client comes in for a review on Monday but you cannot get them to sign the form due to the Tuesday anniversary.
Agree – this has all been a PR exercise but there is no “meat on the bones”.
None of these recommendations save much time. Having a universal consent form which gathers all the same information as what is currently used, only saves time for those clients who have multiple investment/super products, which I would assume are in the vast minority. And then they bring in an extra consent for insurance clients, which when we still have to do SOA’s (which have disclosure and consent to commission) is absolutely pointless. Which other occupation needs consent to receive a commission?
Dont forget the flash new standard fee consent doesnt even have to be accepted by a product provider. So absoluely nothing has changed.
“Product issuers and advisers who chose to use a form would be able to rely on the form to meet their requirements in relation to consent. However, the form would not be required or mandatory so as not to restrict product issuers who want to apply different rules or practices (in addition to the legislative requirements) to the payment of ongoing fees.”
[Schedule 1, item 17, section 962Y of the Corporations Act]
This sounds like fees for no service, he is in the job for 18 months and has done nothing.
Sounds like he is adding another form or more red tape to the insurance industry, and he expects this to reduce the cost of giving advice sounds like he has never looked at an SOA or and FSG where all this information is disclosed already.
Politicians with a conflict of interest should not be allowed to draft legislation.
As always, per Sherlock Holmes, Hercule Poirot, Ms Marple and Columbo: follow the money. The minister is simply obeying his masters (union-run industry funds).
I see that the FAAA has once again managed to achieve an outcome commensurate with their influence….negligible to non-existent.
With all of their lobbying efficacy, one questions the value of the membership fees paid.
The FAAA should stop pretending that they have a voice within the Labor party and throw their full support behind the coalition.
Soooo… Nothing really has changed.
We are all judged on results. Or, lack thereof.
Good to see that an additional “sign-off” is being introduced where advisers receive a commission on life insurance…. Apparently, the client consenting to this when signing the SOA and the application, is not already sufficient. Go figure
I totally agree.
We should have one simple advice document fit for purpose that clients will read and understand and advisers can refer to in the future to prepare for their regular client reviews.
Exactly! more duplication – bureaucrats can’t help themselves. After the lengthy and costly FDS, you would think that common sense would apply, but sense is not common in Canberra.
So, he has done… not much
Actually nothing at all. Who’s surprised??
It remains a political exercise in being seen to do the right things, rather than actually deliver some practical solutions for all involved parties.