Treasury seeks feedback on draft regulations for advice reforms

On Tuesday, Treasury announced the commencement of the consultation process on the Treasury Laws Amendment (Delivering Better Financial Outcomes) Regulations 2024 (draft regulations).

These are consequential amendments to support the implementation of the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024, and the first part of the government’s response to the Quality of Advice Review.

The draft regulations:

• Support written information or documentation requirements for the purposes of section 99FA of the Superannuation Industry (Supervision) Act 1993 (SIS Act) to continue to be met electronically.
• Remove requirements related to fee disclosure statements, update record-keeping obligations for new consent requirements, and remove references to civil penalties which are removed in the Amending Bill.
• Align requirements for Financial Services Guides and Website Disclosure Information and make other consequential amendments.
• Streamline the regulations for conflicted remuneration in line with the changes to the Amending Bill.
• Ensure the informed consent requirements apply for benefits given in relation to a general insurance product where personal advice is provided.

All interested parties have until 8 July to provide their feedback.

The government introduced the first tranche of the DBFO bill to Parliament in March. While a majority of the bill is uncontroversial and attempts to scrap some of the red tape that has overwhelmed the profession in recent years, advisers have opposed suggested amendments to Section 99FA of the SIS Act, which appear to dictate that superannuation trustees must review clients’ statements of advice (SOAs) before they can satisfy members’ requests for payment of advice.

The bill has been greenlit by the House of Representatives and is now under consideration by the Senate economics legislation committee, with a public hearing scheduled for 13 June 2024.

Last week, ifa reported that Scott Hartley has joined advisers in calling for amendments to the proposed change to Section 99FA of the SIS Act after advisers suggested that this part of the bill actually tries to covertly restrict advice fee payments from super, potentially impeding access to quality financial advice and raising costs.

Both the Financial Advice Association Australia (FAAA) and the Financial Services Council (FSC) have called for explicit changes to the bill’s provisions to ensure the regulatory burden on trustees and advisers does not increase.

The Minister for Financial Services, Stephen Jones, has clarified that it was not his intention to create additional checks. Instead, he has insisted that the policy intent was simply to continue current practices – a risk-based sampling approach.

Speaking at ifa’s Adviser Innovation Summit last week, Sarah Abood, CEO of the FAAA, shared that the government has amended the bill’s explanatory memorandum (EM) to clarify that it does not require a rigorous review of each SOA. However, she noted that maintaining the bill in its current form means the issue persists.

The concern is that if the wording remains unchanged, some trustees may interpret it as requiring more rigorous checks, thereby adding unnecessary red tape to the process.

“Our strong preference is that these changes be made in the law itself because it’s challenging practically to always have to read the EM,” Abood said.

“We think it would be far clearer and more explicit to make that change in the legislation itself and we continue to argue for it.”

Her words were echoed by Hartley on Thursday, who said in a statement: “We acknowledge amendments the government has made to the bill’s Supplementary Explanatory Memorandum. However, this does not resolve the issue with the current drafting which may place an undue burden on superannuation trustees before they are able to satisfy members requests for payment of advice – a burden which may ultimately lead to higher costs for superannuation members.

“Financial advisers play a key role in helping Australians manage their financial outcomes and we encourage the government to recognise the importance of accessible and affordable advice.”