Do new independence disclosures go far enough?

PIFA president Daniel Brammall said the industry association had been unsuccessful in its bid to amend royal commission legislation around annual renewals and independence disclosures to include asset-based fees, despite “a great deal of interest from all sides of politics”.

“The interest came from the government, the opposition and the cross-bench, as well as from consumer groups like Choice and Super Consumer Australia,” Mr Brammall said.

“Senator Rex Patrick put forward an amendment to the government’s draft legislation insisting that asset fees be explicitly called out in the Corps Act definition of independence, section 923A. This would avoid consumers being misled.”

Mr Brammall said Senator Patrick’s amendment had been withdrawn at the time of the contentious bill’s passage through the Senate, following assurances from the government that the issue would be addressed at a later stage.

“Senator Hume acknowledged Senator Patrick’s amendment and gave him her undertaking in the Senate that they would be dealing with the issue,” Mr Brammall said. 

“On that basis he withdrew the amendment and the bill was passed. In my subsequent meeting with Jane Hume’s office it was clear there is no such intention.”

Mr Brammall said commissioner Kenneth Hayne had specifically pointed to some forms of conflicted remuneration that were still allowed in the industry in his final report, suggesting these should be addressed in a later review of advice legislative settings by the government.

“Although FOFA banned some forms of conflicted remuneration including some ‘trail commissions’ Hayne noted that FOFA’s work in this area didn’t go far enough, and specifically called out the conflicted remuneration practices of the industry as “an attempt to replicate the revenue stream that flowed from a combination of upfront and trail commissions,” Mr Brammall said.

Consumer advocacy group Super Consumers Australia has also called for asset-based fees to be addressed in the government’s forthcoming quality of advice review, which will respond to the royal commission recommendation for further investigation into how regulation is affecting adviser processes.

“Disclosure of a conflict acknowledges the problem, but consumers would be better protected by removing the conflict altogether,” Super Consumers director Xavier O'Halloran said.

“This is why we strongly support the Hayne recommendation to review existing conflicts in financial advice by 2022. This review has to deal with the long standing conflicts in the financial advice sector, including asset-based fees.”