Transition to individual registration
Perhaps the most transformative piece of change recommended in the FPA’s policy document is the removal of the current AFSL system for advisers, to be replaced with individual registration.
Following on from the government’s commitment to establish a single disciplinary body for advisers, as recommended in the royal commission final report, the association has suggested this body also be responsible for setting professional standards, investigating standards breaches and maintaining a register of advisers. The TPB, ASIC and FASEA’s existing regulatory standards would be rolled into one set of standards maintained and monitored by this body.
The body would also be responsible for collecting a single schedule of fees from advisers that would encapsulate all relevant costs of regulating the sector.
The current AFSL system would be maintained to regulate the operation of financial products only, to ensure adequate separation of product and advice.
Individual responsibility
While the adviser disciplinary body would be responsible for verifying information on the adviser register such as an individual’s qualifications, maintaining accurate information on the register would be the responsibility of the individual adviser, not their employer.
Eliminating general advice
The FPA has recommended the term ‘general advice’ be done away with as it is too confusing for consumers. The association has suggested the terms ‘product information’ or ‘strategy information’ be used in situations where general advice was previously given.
The FPA has also called for the general advice warning to be amended to specifically point out to consumers that they should seek advice from a financial planner if they want their personal circumstances taken into account, and has suggested the government conduct a review of how general advice is being provided following the change of terms.
Strengthening consumer protection
The FPA said the existing sophisticated investor definition needs to change, with the current income and assets tests to be moved up to a more appropriate dollar amount to today’s standards and indexation built in to allow the amounts to move up over time. The association has also suggested a “financial capability measure” be put in place to assess the competence of sophisticated investors.
The FPA suggests ASIC also conduct a review of the ways restricted terms such as ‘financial planner’ and ‘financial adviser’ are being used, as well as related terms such as ‘financial guru’ and ‘financial mentor’.
Improving the PI market
The association has pointed to the fact that the operation of the PI insurance market for financial planners needs to be improved, and has suggested the way to do this is by implementing the recommendations from Richard St John’s 2012 report into compensation arrangements for consumers of financial services.
Access to consumer data
The FPA has made a number of recommendations to improve the access advisers have to their customers’ financial information, including requesting that the ATO and Centrelink open up access for financial planners to their clients’ online profiles.
In addition, the forthcoming consumer data right initiative should be extended to super products and allow financial planners to become accredited to access client data if the client gives them permission.
Doing business electronically
The FPA said the government also needs to do more to encourage, and where necessary require, participating institutions in the financial services industry to provide electronic options for disclosure and transaction documents.
Making scaled advice more practical
The FPA has called for ASIC to provide detailed guidance on what constitutes a compliant SOA for scaled advice, in order to give more confidence to licensees that this type of advice can be provided without inadvertently breaching the law. The current ‘small investment advice’ provision should also be extended to investments up to $50,000 and include super, in the association’s opinion.
Tax deductible advice
The FPA has proposed the government extend tax deductions to cover all forms of financial advice rather than just that which directly relates to the creation of investment income. It has suggested the government cap the amounts that can be deducted or introduce income means tests to keep deductible amounts at a sustainable level.
Evening the playing field on deduction of advice fees
The FPA has suggested a single set of rules be created around the deduction of advice fees from super, which “apply equally to all superannuation funds, accounts and investment choices” and create an even playing field in terms of disclosure, renewal and authorisation.
Retaining LIF commissions
The association has said commission levels should remain where they are under the current LIF requirements in order to continue to give consumers choice around paying for insurance advice through commissions or flat fees. Insurers should also be encouraged to create new fee collection options and commission-free products for advice clients.
I’m amazed and disappointed by the comments attacking this proposal this week.
While the FPA haven’t been very effective in the past, this policy platform could transform the advice business. It could reduce our costs and the costs to our clients.
And if we’re going to accuse the FPA of self-interest, might I suggest reading the available annual reports of the six licensees that signed that letter of protest this week?
Check out the millions in directors fees, executive remuneration, ticket clipping, related party nonsense in those reports (all threatened by the FPAs proposal) and tell me again how the FPA are the villains here.
I’m yet to hear an objection to this policy that can’t be answered by either:
“Every other profession can do it”
Or
“If licensees are so great and vital – how did they prevent us getting into the mess we find ourselves in now?”
The FPA are towing the insurers line (who fund them) when stating risk commissions should stay as they are. You’d have to be pretty dumb not to realise that the current rates have not worked. New business has fallen off a cliff, under-insurance has worsened. Only an 80/20 with 1 year clawback is going to save this part of the industry. Advisers can’t afford to write risk anymore and customers can’t afford the fees.
Let’s destroy the industry by letting the FPA but a play to be the king of the castle. They do win the award for most morally corrupt business in towm.
These are well and good, but it would be good to hear now from a body that represents Advisers. Is it possible that IFA interviews such a group?
The closest we have to a real adviser groups point of view is the comments section here!
I know its not fashionable to like the FPA but…this is is probably the best thing to come out of our industyry in a long time!
No doubt there will be many mixed comments about this. The issue the FPA faces is the division they’ve contributed to among advisers, caused by the lack of clarity as to who they represent. Their professional partner program creates a conflict that leads them to represent only the large licensee’s (the Banks etc). Discounts to one member because you work for AMP and another pays full fees depending on your employer, does not help. We’ve seen there self interest when they sided with Banks during the CBA advice scandal in return for a Guaranteed source of members. Again self interest during FASEA. They just don’t know.
Now they launch a proposal just when these same institutions stop supplying them with a spread sheet of names it’s only reasonable for advisers to be deeply divided and suspicion of the FPA. It’s for those reasons I would encourage members to leave the FPA. [b]They don’t represent me, I just don’t trust them.[/b][b][/b][u][/u][u][/u]
Im sure the minister for superannuation and financial services will take this on board. Another excellent job spending members money.
Et tu FPA.
At the Risk Advice Summit in Sept 2019, all the advisers there (and it appeared FPA too) said the current LIF upfront commission of 60% and 80% was more appropriate.
Being on the front foot. Good. Needed. Benefits for everybody including consumers.
While I don’t disagree with any of their recommendations (in fact I like them all) they have completely missed the most important issue ie. the unworkable and dangerous FASEA Code of Ethics. This is where all of their energy needs to be focused. Until that issue is resolved, I’m not interested in hearing anything else from the FPA or any other self-proclaimed professional body for that matter. The FASEA Code of Stupidity does nothing to advance our profession. It is a document designed to make it impossible for us to operate in a manner where we can feel confident that we are 100% compliant. If the Code is allowed to continue unchanged, we are nothing more than a flock of sheep sitting in an abattoir holding pen waiting to be slaughtered by ASIC, AFCA, the disciplinary body and class action lawyers.
Yes, we all know your view on the COE very well “Giggity”. You have posted it to either this forum or MM every day this week whether or not it was the subject under discussion.
Most of these make sense I feel
We need to decrease the compliance burden in order to be able to provide cost effective advice
-The best interest duty has tied adviser’s hands behind our backs, as it’s impossible to prove that an outcome is better. Trying to prove it is an exercise of endless paperwork.
-12 month contracts that outline the work you’ll perform for your client in the future 12 months, is beyond idiotic. We’re now expected to be magician’s as well as planners and predict client’s future circumstances.
-12 month contracts in line with FDS, that outline what services you’ve performed in the past 12 months, and would you like to Opt In again, is logical and more practical.
-Speaking of FDS and Opt In, why are we still doing these if we are now also doing 12 month contracts of future work to be performed? Talk about doubling up
Anyway I have a 3.5 hour exam to study for on the FASEA code of impracticability. Once I’ve passed an Ethics exam on a code that’s been deemed by everyone to be completely unworkable, there’s little doubt I’ll be the most ethical person in Australia. It’s almost unethical to follow a code that’s impossible to implement.
Luckily the FPA are focussed on the things that really matter…..trying to make themselves relevant.
BID – agree with your comment
12 month contract – Disagree. What other industry can charge a client fees and not be able to tell them what you will do for these fees until after the fact.
pretty reasonable