Following feedback from the industry, the government will scrap the requirement for financial advisers to report “nil complaints” to product issuers.
Under the legislation underpinning DDO, financial advisers and licensees who are distributors of financial products were required to report complaints in writing on a regular basis to product issuers. This also included submitting a “nil complaints” report if no complaints about the product were received.
But ahead of the 5 October DDO start, the Treasury has updated the regime, noting the removal of nil complaints requirements.
In applauding this major development, the Stockbrokers and Financial Advisers Association (SAFAA) referred to the “nil complaints” requirement as “a significant and unnecessary regulatory burden placed on distributors from which issuers would not gain any benefit”.
“Both distributors and issuers can now focus on complaints, rather than the fact that no complaints have been received in relation to particular products,” SAFAA CEO Judith Fox said.
She drew attention to the number of issuers stockbrokers and investment advice firms distribute products from, including ETFs, TraCRs, warrants and mFunds.
“Each of these issuers has multiple products, resulting in many hundreds of ‘nil complaints’ reports needing to be sent every quarter, as SAFAA members receive very few complaints about these products,” Ms Fox said.
“The work involved in setting up a system to communicate these reports to issuers was proving to be costly and burdensome.”
Last month, the Treasury announced a number of amendments to the DDO framework in response to industry feedback, which included a clarification of the product types exempted from the obligations — margin loans to corporates, foreign cash that is settled immediately, and non-cash payment facilities such as credit and debit card facilities.
The amendments also made clear that employees of licensees are not subject to their own separate set of DDO obligations, and that 31-day term deposits are included in the regime.
The Treasury at the time confirmed ASIC would provide temporary relief giving effect to the government’s policy intention for the changes until the legislative amendments were passed.
On the one hand they want advisers to be “professional” and have put onerous education requirements in place in order to achieve this goal.
On the other hand, DDO is introduced, which appears to be a ‘hand holding’ exercise to tell advisers which products they can and cannot use for certain clients.
I was under the impression that an adviser’s training and experience prepared them to be able to accurately select an appropriate product for a client. As such, I cannot see a valid reason for the DDOs to exist in the first place!
Clearly the meaning of “major” has changed from my understanding. This is “minor” to “insignificant” at best.
More ridiculous box ticking that will achieve nothing – everyone will now scramble to find some software that ticks the boxes with the least amount of fuss and stress.
In the meantime, costs will go up for clients for no discernible benefit…
Looks like Frydenberg and Codina are getting a little nervous….and well they should be!!
Why are Financial advisers providing retail advice with all the consumer protections in place not exempt from DDO? This is yet another complete fail by Treasury and creating yet more duplication of effort. More pages and longer SOAs will result and this adds nothing to consumer protection as retail advice regulation already more than ensures products are provided that suit clients needs. Again the cost to clients of retail advice will go up for absolutely no benefit.
Another glorious piece of legislation to keep the costs down.
Completely unrelated, does anyone have a spare brick wall I can use to continue belting my head against as I need a change of scenery?
The fact that Jane Hume (& her advisers) didn’t even pick this ridiculous level of pointless red tape, is more proof she should be replaced by a more competent Minister. What would be more useful if Hume was forced to spend a week working in a small practice, & she would be shocked to see how much compliance work this Govt has imposed on adviser firms. It’s simply embarrassing.
I really have to say a lot of the regs are very necessary. With the right compliance manual, the right software and an acceptance of the regs there isn’t that much compliance work. The pressure comes however the smaller the business gets. A one or two person show with no or part-time support staff is going to find the environment costly measured against the amount of business they have. A larger firm, operating under the exact same “red tape” is far better positioned to absorb the costs. There is definitely a size of practice that is no longer viable but they have a great opportunity to merge into or sell into a larger operation with a good support model.