Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
FASEA to be disbanded, exam still required
2021 may be shaping up as the ‘Year of the Financial Adviser’. After what has been a tumultuous and stressful few years for the industry, promises of a more streamlined regulatory framework may finally be coming to fruition.
Assistant Minster for Superannuation and Financial Services, Jane Hume, and Treasurer Josh Frydenberg had a business day on Wednesday, releasing draft legislation of two significant changes to the financial advice industry. Both have their foundations in the recommendations of the Hayne Royal Commission, but you could be excused if you heard a collective sigh of relief from the industry on Thursday.
What was the announcement?
The Australian Federal Government, under the tireless work of Minister Hume, have released draft legislation that will disband the Financial Adviser Standards and Ethics Authority (FASEA), moving it is ‘standard’ setting role to the Treasury and passing responsibility for the adviser examination and registration requirements to ASIC. ASIC will therefore become the ‘single disciplinary body’ that has been flagged for many years.
There have been many reports of a flood of accountants and advisers leaving the industry, either selling their businesses or dropping their financial adviser registration, and whilst this move will do little to change that, it at least reduces the number of reporting bodies. According to the proposal, the FASEA Exam an Education Requirements will still need to be met by the current deadlines.
Likely the biggest change, is that the ‘Standards’ which came under significant scrutiny due to their complexity and in some cases confusing explanations, will be administered by Treasury via a ‘legislative instrument’. This may lead to a re-writing and simplification of their content.
‘Independence’ definition
It did not end at FASEA for the busy Coalition Government, who announced changes to both the Opt In and Fee Disclosure Requirements, we wrote about these here, and pushing forward with the disclosure requirements for those wanting to call themselves ‘independent’.
According to reports, the proposal will legislate the requirement for financial advisers across Australia to disclose whether they receive commissions or volume-based benefits and restrict the use of independent to those who don’t. The specifics have not been released, however, it has been suggested that those who receive commissions for providing insurance advice, regardless of their size, will be included. Many industry insiders are suggesting it could extend to include those charging percentage based asset management fees or managed account fees, but will need to await the specific wording to confirm this.
