FSC wants financial advice on economic roundtable radar

The Financial Services Council (FSC) has used its submission to the government’s Economic Reform Roundtable to put forward a vast array of recommendations that it said would “produce substantial improvements” across the Australian economy.

Ranging from holistic and strategic tax reform – a “crucial element in promoting productivity and the sustainability of Australia’s budget position” – all the way through to rejigging breach reporting, the industry group has also included a strong focus on financial advice issues.

Increasing access to advice remains at the top of the FSC’s list, taking aim at the “regulatory red tape and costs that do not enhance the customer experience”.

While the “reforms are being progressed”, the FSC added that it “should also consider the role of digital advice solutions to enhance efficiency, lower cost, and complement the provision of person-to-person advice”.

Education reform for financial advisers, which saw a proposal from the government in February to broaden the degree requirements, was also prominently featured in the submission.

“This is a welcome response to the wider push from advice and accountancy bodies to revise the core knowledge areas and elective requirements on relevant providers to provide more flexible pathways into the advice profession and ultimately expand the pool of financial advisers in the market,” the FSC said.

“The current education requirements for financial advisers are unduly prohibitive to new entrants, exacerbating the shortage of financial advisers. Most young people at university study a generalist degree such as commerce, business, or economics, but have competency in some topic areas that are relevant to financial advice.

“The pathway to becoming a financial adviser should not be limited to people who have completed a financial planning degree and instead should be flexible enough to accommodate new entrants and career changers by having elements of their pre-existing degree courses recognised, while maintaining appropriate qualification levels to ensure consumer protection.”

Alongside broadening the pool of new entrants that could become advisers, it would also support stockbrokers and accountants pursuing a career change to meet the education standards, the FSC said.

“Appropriate pathways should also be developed for the proposed new class of adviser, under the second Tranche of reforms in response to the Quality of Advice Review, to become relevant providers over time,” it added.

Advice fee consents need to be streamlined

Earlier this week, FAAA general manager of policy, advocacy and standards Phil Anderson highlighted the ongoing battle of fee consent forms, with the Australian Securities and Investments Commission (ASIC) having confirmed that cases where a fee consent form does not include an account number could be a reportable incident.

“It's an extra step to make sure that the fee is coming out of the right account. I don't think it's necessary,” Anderson told ifa.

These requirements stem from the first tranche of Delivering Better Financial Outcomes (DBFO) legislation, which significantly changed the opt-in, fee disclosure and fee consent obligations when it passed Parliament in July 2024.

The reform, as the FAAA explained, “removed the Fee Disclosure Statement (FDS) obligation and sought to combine multiple consent form obligations, including the need to comply with the obligation to obtain consent to continue an Ongoing Fee Arrangement (opt-in or renewal) and the obligation to obtain consent for a fee to be deducted from a product account”.

Anderson added that, so far, this new rule has meant that licensees and advisers have had to put new ongoing fee arrangements in place with new fee consent forms, a time-consuming undertaking.

The FSC submission also called for a legislative fix for the fee consent “unintended consequences”.

“The newly drafted Section 962T(c) of the Corporations Act 2001 requires the fee consent to specify the ‘account number’ of the product from which advice fees are to be deducted,” it said.

“This new requirement is not representative of the long-standing industry practice to combine the initial advice fee consent form with the application form to open a product account. The change introduces a new, inefficient and costly step in this process which will require costly and complex system changes to implement.

“Product providers have employed several strategies to address these unintended consequences. However, ASIC has signalled their view that these approaches do not meet the requirement. While having no modification or exemption powers in this area, ASIC has now issued a limited no-action position in certain circumstances.”

This doesn’t resolve the issues and a legislative amendment is “urgently required to address the underlying policy issue and permit a sensible and practical response”, which the FSC said could be part made through a technical amendment Bill or as part of the DBFO Tranche 2 changes.