An industry body has called on the government to delay the implementation of key royal commission legislation affecting advisers until 2021, in an effort to keep advice at affordable levels for consumers struggling with the financial impacts of COVID-19.
In its submission to ASIC’s consultation around fee consents and independence disclosure, the AIOFP said changes to fee opt-in requirements should be pushed out to 1 July 2021, as immediate changes would add an unnecessary level of complication for advisers and clients given the current circumstances.
“The current COVID-19 global impact, when combined with the pace of change for our industry in recent times, strongly suggests any changes should be delayed until 1 July 2021 and the transition [period] for all clients should be two years,” the association said.
“This will assist consumers and advisers to meet the proposed requirements within the client’s current review cycle and combat the unknown COVID-19 fallout confronting us all.”
The submission also called for the streamlining of disclosure documents if further fee consents were to be brought in, while also pointing out that the short turnaround times for clients to opt in to ongoing fees were largely unworkable.
“It makes sense to have only one document covering the [service] agreement, renewal notice, client consent forms for product providers (e.g. trustees), including fees and services for the upcoming year, based upon the client’s current situation,” the AIOFP said.
“It also makes sense to have a fixed 12-month anniversary date for client renewal, but with flexibility to renew within three months of the anniversary date to cover unforeseen events like holidays, illness and pandemic situations.
“Only giving clients 30 days to confirm with the renewal of the agreement will not be satisfactory if they are inconvenienced with illness, holidays or any other distraction.”
Pace of grandfathered revenue closure should slow
In a separate communication to members, the AIOFP said it had also written to the corporate regulator requesting it to work with financial product providers to slow the pace at which grandfathered revenue was being closed down, given many clients would face increased fees at a time when they could least afford them.
Late last week, the corporate regulator told licensees it would not ask product providers for data around advisers still receiving grandfathered revenue during the COVID-19 crisis, which the association’s executive director, Peter Johnston, said could be because “they are sensing a backlash from consumers who are starting to realise that the cost of advice has escalated”.
Mr Johnston told ifa that six of the major product providers in the advice market, including BT, MLC, BlackRock, AMP and Colonial First State, had all removed grandfathered commissions from their products in the last six months, well ahead of the industry deadline of 1 January 2021. IOOF was the only major institution to have confirmed it would not remove grandfathered revenue before the deadline date.
“All this is doing is causing advisers to charge their clients more to cover their costs or consumers are opting not to seek advice, a clear danger in these unprecedented times,” Mr Johnston said.
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