Regulation

While the council’s plan for broad tax reform will grab headlines, its three recommendations for the advice industry have the potential to radically uplift the overall health of the financial services sector.

AFCA stands by the use of its “But for” methodology to calculate compensation payments, despite the FAAA’s protestations. Clients will get paid what they lost, plus what they would have earned if the advice wasn’t inadequate. Just don’t call it payment for theoretical loss, or opportunity cost.

Most of what Jones announced was already known, including a new class of advice. But a few key elements – related to adviser education, product limitations and scoped advice – should provide extra relief to an industry in dire need of reform.  

“I wish I could say this is an isolated example,” Kirkland said, explaining the regulator’s concern about a small cohort of advisers who transfer client funds into high-risk investments after being referred by cold-calling telemarketers.

The legislative threads surrounding financial services “look less like an elegant tapestry and more like a painting by Jackson Pollock”, the ASIC chair said, before announcing a new thinktank to reassess ways the regulator can help make the system more efficient and less complex.

Despite its potential and the massive investment behind it, the Consumer Data Right has had little impact due to a host of factors. Frustrated with its low take-up, the government is making changes to put the framework on “more sustainable footing”.

While the government takes its time drafting the second tranche of advice reforms, representatives for the life insurance agency fear the ongoing delays will spill over into the next federal election, which could mean the can gets kicked down the road even further.

For advisers that have already started relying on website disclosure, the unclear legislation “may or may not” be an issue, the Cowell Clarke lawyer explained. Whatever approach advisers are currently taking, they should all be paying attention when the regulator releases its guide next month.

On the whole, product providers like fund managers have “made progress” with their adherence to target market determination rules. But ASIC warns that when third party distributors come into play, compliance standards begin to slip.

The new rules around superannuation balances over $3 million have many searching for ways to mitigate the impact. The tax advantages of investment bonds may provide a viable alternative.

While the minister has remained relatively mute on the obvious issues with the CSLR, he will at least allow the association to discuss the scheme’s flaws with Treasury at some point.

Appropriately enough, it took a regulatory breakdown to finally ruffle the policy chief’s feathers. In the first of a series of whitepapers aimed at collating the issues, Phil Anderson lays bare the failures of government, ASIC and E&P Financial Group.