Australia’s two primary adviser associations have called for further clarity on the new amendments to the Future of Financial Advice regime requested by the Palmer United Party.
In separate submissions to the Senate Economics Legislation Committee inquiry into the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014, the Association of Financial Advisers (AFA) and Financial Planning Association (FPA) have both recommended that further guidance needs to be provided on the new disclosure requirements.
Under a deal made between Senator Mathias Cormann and MP Clive Palmer, new requirements have been added to the Bill which include changes to advisers’ Statement of Advice (SoA) obligations (see: Palmer Deal Secures FoFA Amendments).
The AFA said it was broadly supportive of the PUP amendments, but believed additional guidance was required to ensure advisers fully understand these obligations well in advance of the commencement date of 1 January 2015.
‘We support the requirement to have both the adviser and the client sign the Statement of Advice (SoA), however we believe that it is necessary to consider the potential complications that will eventuate for financial advisers who do a greater proportion of their business via either the telephone or email or a combination of both,’ the AFA said in its submission.
‘We would like to ensure that the guidance provided around this measure gives particular emphasis to the rural/regional scenario and clearly addresses the options with respect to electronic signatures. We would also like to see greater clarity on the extent of the adviser’s obligation should the client refuse to sign the SoA, particularly where the client has declined to accept the advice. This should not be an unlimited obligation in the circumstances where the financial adviser has taken all practical steps, but the client still refuses to sign the SoA. In many cases it would be impractical to enforce a client to sign for the receipt of an SoA, where that client declines to accept that advice.’
We would expect ASIC to provide clear guidance on how to present the new disclosure requirements
The FPA also lent its support to the policy intent of the new amendments, but noted concerns over the practical application of the changes.
Specifically, the FPA observed there were duplicative elements in the provisions relating to the disclosure of remuneration in the SoA, given fee disclosures were already required in the Financial Services Guide and the new Fee Disclosure Statement regime.
‘We would expect ASIC to provide clear guidance on how to present the new disclosure requirements, as well as the measures requiring the signing and acknowledgment of SOAs and further instructions, in order to prevent this regulatory measure from devolving into burdensome red tape,’ the FPA stated.
The FPA submission added that it had frequently raised concerns about the existing disclosure burden for advice providers and for clients of financial planners.
‘Disclosure-based regulatory regimes have come under intense scrutiny through the Financial System Inquiry and elsewhere. It is worthwhile to have clients aware of the advice provider’s responsibilities under FOFA, as well as the rights of the client, but this measure must be implemented in a client-focused manner to be effective,’ the FPA said.
The Bill was referred to the Senate Economics Legislation Committee on 4 September 2014, after it passed the House of Representatives. The Committee is due to deliver its report by 30 September 2014, after which the Senate is expected to vote on the Bill.
