Advice body urges Senate amendments to renewals bill
An advice industry body has proposed a number of amendments to royal commission legislation concerning annual renewals, as it seeks cross-bench support to prevent the bill from passing in the Senate in its current form.
In a communication to cross-bench senators sent last week, AIOFP executive director Peter Johnston detailed a number of proposed amendments to the Financial Sector Reform (Hayne Royal Commission Response No 2) Bill 2020, which passed in the House of Representatives last week and is expected to soon be debated in the Senate.
Mr Johnston said the role of super trustees in being required to review and ensure proper ongoing fee arrangements were in place before deducting fees from accounts was problematic, and that further protections for both consumers and trustees needed to be put in place.
“The trustees are generally not qualified/licensed to perform these duties — they are duplicating the role of an adviser by assessing the adviser’s advice to their client,” Mr Johnston said.
“We have spoken to a number of trustees who are concerned about their ongoing liability for making decisions on matters they are not qualified to do. From a consumer’s perspective, their privacy is being violated by a third party who they have not met and potentially will have access to all of their personal details without their consent.”
Mr Johnston said the association was proposing the legislation specify the trustee must be appropriately qualified to make decisions on financial advice, and the consumer must agree to have a third party access their data.
Further, Mr Johnston said the requirement contained in the bill for an adviser to declare their independence did not sufficiently cover some forms of payments received by those advising on property from developers.
“The requirement to disclose independence is welcomed, but section 923A [of the Corporations Act], the definition of independence, is flawed and outdated,” he said.
“The major flaw is advisers selling direct property are receiving benefits from developers for referring clients and it is not caught under s 923A. Direct property is regulated by the state governments, not ASIC, and this behaviour is widespread in the SMSF sector.”
Mr Johnston said until the discrepancy was addressed, the requirement to declare independence should be dealt with at a later date.
The AIOFP additionally suggested the requirement for clients to opt in to ongoing service arrangements be reduced to every three years, with an option to opt out to be presented to the client every year when their fees for the next 12 months were disclosed.
“Fees are disclosed in the SOA, FDS, opt-in, FSG and this proposed legislation — five times. This duplication is unnecessary and costly to consumers,” Mr Johnston said.
“With all fees disclosed in advance, not in arrears that concerned commissioner Hayne, with the ability for a client to opt out at any point, [this would] provide major cost savings and transparency for consumers.”