The Financial Planning Association of Australia has remained cautious of the adviser impact of new draft legislation from the government implementing 22 recommendations from the Hayne royal commission.
Of the 22 recommendations to be implemented under new legislation announced by the government last week, the FPA said it would be particularly focused on challenging Recommendation 2.1 relating to the requirement for financial advisers to renew client fee arrangements every 12 months.
Currently, advisers have a two-year period to renew client fee arrangements.
“The FPA agrees financial advisers should be required to periodically review and renew ongoing fee arrangements, document them and seek the consent of their clients for any fees to be charged,” said FPA chief executive Dante De Gori.
“However, we believe requiring this to be conducted annually without any modification to the laws around when an ongoing fee arrangement can be renewed rather than reset, adds considerable time and cost pressures on financial planning practices. It is not practical and will be too much of an administrative burden for many practices.”
The FPA noted it would remain cautious about the impact that implementing the recommendations under the legislation would have on advisers.
In particular, it warned of the further increase of the administration burden on financial planners while servicing their clients.
Mr De Gori said it is committed to helping members prepare and comply with the new legislation.
“The most important thing for financial planners is to understand the impact this will have on their business and to start planning how they can efficiently and effectively operate their business in this new legislative environment,” he said.
“This legislation will require business practice changes, administration changes, disclosure changes and financial planners need to be thinking about this sooner rather than later.”
What the government’s draft legislation will address
The government’s new draft legislation that will implement the following recommendations from the final report of the Hayne commission:
In addition, the government said it would move to strengthen and enhance the regulatory regimes for ASIC and APRA by implementing:
Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.
You can contact him on [email protected].
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