The Advisers Association Ltd (TAA) has expressed concern over the raft of draft exposure legislation released by Treasury on 31 January 2020 in response to recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Royal Commission), and the Government’s haste to introduce the legislation.
TAA CEO, Neil Macdonald said, “We are very concerned that rushed legislation may result in poorer outcomes for everyday Australians.”
The TAA, which represents AMP Financial Planning (AMPFP) and Hillross Financial Services (Hillross) advisers, made a submission in response to the draft legislation which is due to start to come into effect from 1 July 2020.
“We think any legislation that necessitates such extensive change should be well thought through, have a reasonable consultation period and be introduced gradually. This would allow financial advisers to carefully adapt their systems and processes so that clients are not unintentionally disadvantaged.”
Mr Macdonald said a longer timeframe would help advisers continue to provide an efficient service to their clients and may also help them to find solutions for clients who may no longer be able to afford their advice.
“As it currently stands, some of the draft legislation is flawed and the timeline is both unreasonable and impractical,” he said. “If implemented, processes are likely to be duplicated and paperwork increased. This will make advice more expensive, which in turn will reduce access to advice. For those who can still afford financial advice, the client experience is likely to be worse, not better.”
As well as addressing broader issues, the TAA submission raised several other key concerns, namely around annual reviews, MySuper fees and the use of the terms ‘independent’ and ‘advice’.
- We support the use of the terms ‘independent’, ‘impartial’ and ‘unbiased’ being restricted and a statement being included in the Financial Services Guide (FSG). The proposed start date of 1 July 2020 is however both unreasonable and unrealistic.
- The term ‘intrafund advice’ is misleading. Intrafund ‘advice’ is not advice, but product information. It does not consider the broader implications and options that are specific to an individual’s situation. There is a risk that people who receive it will think they have received comprehensive advice and therefore the term should be changed.
- Positioning intrafund advice as being provided ‘at no additional cost’ is potentially deceptive because it may lead ordinary Australians to think that it is ‘free’. Providers should be compelled to clearly disclose that everyone in the fund is subsidising any individual who accesses it.
- Allowing intrafund advice fees to be charged from superannuation accounts, but not allowing advice fees to be charged from MySuper accounts creates an uneven and unfair playing field, creates a potential conflict for advisers and potentially removes cost-effective client access to advice.
- The terms ‘general advice’ and ‘roboadvice’ are also misleading, as these are information, not advice services. They should therefore also be renamed.
- We broadly support the move to an annual fee, although we are concerned that this will make advice too expensive for many clients who are currently on biennial service arrangements, and also preclude everyday Australians from accessing advice solutions.
- Requiring advisers to notify each product provider every year that a fee is charged has negligible client benefits and serves only to create further client confusion, increase red tape, increase costs for trustees and for advisers, and therefore ultimately their clients.
“Changes to legislation must genuinely improve the advice being given to Australians, the efficient delivery of that advice and access to that advice. Some of this proposed legislation fails to meet those objectives.” Mr Macdonald said. “Financial advisers must be enabled, not unnecessarily hindered, so that they can continue to efficiently deliver sound, cost-effective, client-focused financial advice.”
Mr Macdonald said given the multitude and magnitude of the proposed legislation, he is also disappointed with the short time to respond. “The draft exposure legislation relates to 17 bills in response to 22 Royal Commission recommendations. That was a lot of material to review in the shortest month of the year.”
TAA is urging members to meet with their local Members of Parliament to express their concerns.
About The Advisers Association (TAA) The Advisers Association Ltd (TAA) is a non-profit, member-based association, with a primary role to represent its members. Members are all authorised representatives of AMP Financial Planning (AFSL 232706) and Hillross Financial Services (AFSL 232705). TAA also works closely with the Charter and New Zealand adviser associations.