Last month, the government unveiled the first tranche of draft legislation for its Delivering Better Financial Outcomes package of reforms, which Financial Services Minister Stephen Jones said aimed to reduce red tape.
In response to the government’s consultation of the reforms package, the Financial Advice Association Australia (FAAA) outlined several concerns with the draft legislation, including the notable absence of the removal of safe harbour measures.
“The exclusion of the best interests duty safe harbour repeal and rationalisation of advice documentation recommendations from this first batch of reforms has significantly impacted the response, with many of our members expressing disappointment that this first tranche of reforms will not deliver the productivity benefits they hoped for and need,” FAAA chief executive Sarah Abood said in the submission.
There has since been greater clarity on this issue, with Mr Jones announcing that the existing best interests duty “safe harbour” steps will be removed. At the same time, the requirement to provide appropriate advice will be retained.
“All of this will reduce the red tape burden on advisers and should lead to a reduction in cost,” the minister said.
Ms Abood added that the decision not to mandate a fee consent form was among the most pressing issues.
“A standardised fee consent form will only deliver productivity benefits if product issuers are required to accept it,” she said.
“As they have already invested in systems and processes to meet this requirement, it is unlikely that product providers will change their approach without a legislative requirement for them to do so.”
According to the FAAA, the way forward is to either remove the requirement for product issuers to verify client consent for every account or require product issuers to accept the standard form as evidence of client consent.
Ms Abood said that the FAAA’s preferred method would be the first of these options.
“We now believe that the only sensible way to move forward is to remove the requirement for the fee consent form to be provided to product providers and allowing them instead to operate a sample-based audit regime,” she said.
“This will remove the requirement to achieve standardisation across all facets of the fee consent process, and ensure that the fee consent engagement between the adviser and the client is client-centric, rather than driven by the compliance obligations and different requirement of the various relevant product providers.”
The fixed anniversary date for fee consent was another sticking point for the FAAA, noting that it “prevents advisers from bringing forward the renewal process, and not allowing advisers to sensibly rationalise the key dates for client groups (husband and wife, SMSF, family trust etc)”.
Since submitting its thoughts on the first tranche, the FAAA has emerged as one of the most fierce opposers of the government’s overall QAR response, which saw it recommend the creation of a two-tiered advice system on Thursday, under which product providers, including the banks, would be permitted to provide advice.
