{"id":48810,"date":"2020-03-02T14:05:34","date_gmt":"2020-03-02T03:05:34","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=48810"},"modified":"2020-03-11T17:15:57","modified_gmt":"2020-03-11T06:15:57","slug":"practicality-urged-on-royal-commission-advice-reforms","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2020\/03\/02\/practicality-urged-on-royal-commission-advice-reforms\/","title":{"rendered":"Practicality Urged on Royal Commission Advice Reforms"},"content":{"rendered":"

The Financial Planning Association<\/a> has warned the federal government that overly-complex reforms don\u2019t help consumers and only serve to make financial advice more expensive and difficult to access.<\/p>\n

In a statement released this week, the Association says financial advice is already unaffordable for many Australians and the reforms recommended by Commissioner Hayne<\/strong> could make this worse if they are applied without commonsense.<\/p>\n

\u201cThe cost of regulation and lack of time are the biggest challenges for members, according to the latest FPA member survey for 2019,\u201d the statement says.<\/p>\n

FPA CEO, Dante De Gori<\/strong>, says there is a direct relationship between the rising cost of regulation, time constraints on financial planners and the ability of Australians to access advice.<\/p>\n

\"\"<\/a>
FPA’s CEO Dante De Gori … concerns for both the profession and consumers they are seeking to serve.<\/figcaption><\/figure>\n

\u201cIn 2019, 41.4 percent of our members said reducing the cost of providing advice would be a major challenge, up significantly from 25.3 percent in 2018,\u201d he says.<\/p>\n

The statement says that on average, FPA members charge $2,671 to prepare a Statement of Advice for new clients, up almost 10 percent from $2,435 in 2018.<\/p>\n

\u201cThese figures provide an important context to our submissions to Treasury regarding the Royal Commission recommendations,\u201d De Gori says.<\/p>\n

… the cost of regulation and time constraints have become a major issue …<\/p><\/blockquote>\n

\u201cWhat our members are telling us is that the cost of regulation and time constraints have become a major issue for them and their business. While we broadly agree with the draft legislation on the Royal Commission recommendations, we do have real concerns for both the profession and consumers who we are seeking to serve.\u201d<\/p>\n

More specifically the statement pointed to:<\/p>\n

Ongoing fee arrangements<\/strong> where Recommendation 2.1 “changes the biannual opt-in requirement to an annual requirement, adds additional elements to the FDS framework, and requires consumers to annually authorise fees collected through financial products\u201d.<\/p>\n

While the FPA says that in principle, it supports these recommendations, it has highlighted several practical concerns.<\/p>\n

\u201cSimply replicating the existing opt-in provisions and product authorisation requirements on an annual basis is an inadequate solution to implement the recommendations made by Commissioner Hayne.<\/p>\n

\u201cConsideration needs to be given to the amount of paperwork clients are going to need to sign, the administrative burden the proposed drafting will create, and the rigid time frames it will impose,\u201d the statement says.<\/p>\n

The FPA has recommended that financial planners are able to renew ongoing fee arrangements with their clients up to 90 days before the notification date without resetting the anniversary date of the agreement.<\/p>\n

\u201cThe FPA has additionally pointed out that a 12-month transition period for pre-FoFA clients (rather than the recommended six-month transition period) would give financial planners more time to review their clients and better manage the ongoing review process for their client base.<\/p>\n

\u201cThere is a risk that our members, who have told us that they are already facing major time constraints, will be unable to cope with the bottleneck of client reviews in a six-month timeframe,\u201d De Gori says.<\/p>\n

\u201cWe strongly advise government to appreciate the time financial planners require to adhere to these recommended reforms while also seeing their clients, meeting their education requirements and running their businesses.”<\/p>\n

Reference Checking<\/strong><\/p>\n

As to reference checking, FPA says recommendation 2.7 will establish a compulsory scheme for checking references for prospective financial planners. While it supports this, it believes reference checking should be extended beyond financial planners.<\/p>\n

De Gori says there is a risk that those who don\u2019t provide financial planning services but have influence over the financial planning process can move freely around the sector.<\/p>\n

\u201cTo prevent this from happening, the FPA is recommending that reference checking is broadened to include those in managerial and supervisory roles, including directors and responsible managers.\u201d<\/p>\n

Breach Reporting, Investigation and Remediation<\/strong><\/p>\n

On breach reporting, investigation and remediation, two recommendations will strengthen breach reporting requirements for Australian financial services licensees.<\/p>\n

\u201cRecommendation 2.9 will require AFS licensees to investigate misconduct by financial planners and appropriately remediate clients affected by the misconduct.<\/p>\n

\u201cThe FPA supports these recommendations but believes they can be simplified to reduce the administrative burden on financial planners,\u201d the statement says.<\/p>\n

\u201cThe recommendation to strengthen breach reporting effectually creates two regimes; one for breaches before 1 April 2021 and one for breaches after that date,\u201d De Gori explains.<\/p>\n

He says that “a single regime would simplify this by removing the transition arrangements, which would still provide adequate breach reporting requirements in the spirit of Commissioner Hayne\u2019s recommendation\u201d.<\/p>\n

Disclosure of Non-Independence<\/strong><\/p>\n

The statement says that the Government has released draft legislation to require entities (a financial services licensee or authorised representative) who are authorised to provide personal advice to a retail client to disclose in writing to the client where they are not independent and why that is so.<\/p>\n

\u201cThe FPA supports the current definition of independent contained in the Corporations Act as an important consumer protection mechanism, along with the protection of the terms Financial Planner and Financial Adviser. For this reason, the FPA supports the proposal to add a disclosure to the financial services guide obligations.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

The Financial Planning Association has warned the federal government that overly-complex reforms don\u2019t help consumers and only serve to make financial advice more expensive and difficult to access. In a statement released this week, the Association says financial advice is already unaffordable for many Australians and the reforms recommended by Commissioner Hayne could make this […]<\/p>\n","protected":false},"author":24,"featured_media":48817,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-48810","post","type-post","status-publish","format-standard","has-post-thumbnail","category-compliance-regulation"],"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/48810","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/users\/24"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=48810"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/48810\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media\/48817"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=48810"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=48810"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=48810"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}