AFA submission to Quality of Advice Review
AFA News 16 June 2022. On 10 June 2022, the AFA provided our submission on the Quality of Advice Review to Treasury, including addressing the 83 questions that were raised in the Quality of Advice Issues Paper.
In this submission, we have acknowledged the depth of the issues in financial advice and the implications of this for Australians seeking access to affordable financial advice. As we have observed the number of financial advisers decline by over 40% over the last three and a half years, and the cost of financial advice rise substantially, we have also seen financial advisers being very selective in terms of which clients they wish to take on and which ones they wish to retain.
We thank members for feedback as part of this consultation process. We have heard a number of messages, including with respect to the elevated compliance obligations flowing from regulatory change, regulatory uncertainty and licensee risk aversion; the administrative complexity and extra cost involved in the new annual renewal and client consent process; and the importance of holding onto commissions in the life insurance space.
In our submission we have put forward a number of recommendations, including the following:
- The regulatory obligations for the provision of financial advice should be proportionate to the level of complexity and risk of client detriment.
- Provision of a three-year relief period for client consent forms to allow for a standardised industry-wide system solution for the collection and transmission of these forms to be developed.
- Achievement of regulatory certainty to better enable the provision of limited scope advice, including in terms of the requirements for the fact-finding process.
- Increased regulatory certainty on the obligations with respect to a demonstration of compliance with the Best Interests Duty.
- Removal of the Best Interests Duty safe harbour and ability to demonstrate professional judgement or repeal of the “other steps” obligation and the ASIC record keeping class order.
- Fix existing issues with FDS compliance or remove the requirement to report the previous year’s fees, which are already reported in product statements.
- Greater flexibility in the use of Records of Advice, including increasing the threshold for small investments and expanding it to include small life insurance cases.
- Enable greater access to client data through the Consumer Data Right, ATO Portal, my.gov.au and Centrelink.
- Retention of upfront life insurance commissions, but increased to 80% and a reduction in the year two clawback rate.
- Support for small businesses to appoint Professional Year candidates and relaxation of some of the PY program obligations.
Whilst the consultation period has now closed with respect to the QAR Issues Paper, the review is ongoing, and we anticipate further opportunities to engage with the QAR team and to provide input on the issues in the market and the best options to solve these problems. We certainly welcome any good ideas that members might have.
Please click here to see the AFA submission to the Quality of Advice Review.
For any questions with respect to this submission, or to provide us with further suggestions on how to address the problems in the financial advice market, please email email@example.com.
Issued 16.06.2022. AFA Policy & Education Update
Election result and appointment of new Minister
AFA News 16 June 2022. The ALP emerged from the 21 May 2022 Federal election with a resounding victory, winning 77 seats to the Coalition’s 58 seats. This gives them a small majority in the 151-seat House of Representatives. The ALP victory was achieved despite a reduction in their first preference vote, as there was a strong swing to the Greens and Independents in various parts of the country.
Stephen Jones, the ALP member for the NSW seat of Whitlam, located in the Illawarra region, was appointed the Assistant Treasurer and Minister for Financial Services on 1 June 2022. Stephen had been the Shadow Minister for Financial Services since the 2019 Federal Election.
We welcome the appointment of Stephen Jones, who we have worked with over the last three years, and who has developed a sound understanding of the portfolio. Early on in his time as the Shadow Minister, he did express some views on life insurance commissions, however, he made it clear that he would listen to what the advice profession had to say. We believe that he has listened to the views of licensees and advisers on this topic since that time. He has also been active in calling for changes to the financial adviser education standard.
We look forward to working with Stephen Jones as the new Minister.
The Coalition has appointed Stuart Robert from the Queensland seat of Fadden as the Shadow Assistant Treasurer and Shadow Minister for Financial Services. Stuart Robert was previously the Minister responsible for our portfolio between August 2018 and May 2019, so he has a good level of understanding of financial services.
We encourage members in the electorates of both Stephen Jones and Stuart Robert to get to know their local member and to develop an ongoing relationship that will enable further interaction with them as important issues emerge.
As always, for any questions, please email firstname.lastname@example.org.
Issued 16.06.2022. AFA Policy & Education Update
Crypto Asset – service provider consultation paper
AFA News 16 June 2022. On 3 June 2022, the AFA made a submission to Treasury in response to a consultation paper on Crypto Asset Secondary Service Providers: Licensing and Custody Requirements. This consultation is focused on the development of a potential regulatory regime for those entities that provide services in the crypto asset space. This does not involve the regulation of the actually crypto products, but rather those entities that provide services to this market, such as intermediaries and custodians of crypto assets. We are open in acknowledging that this leaves a big gap in consumer protections for those seeking to invest in this asset class.
In our submission, we spelt out the issues that licensees and financial advisers have with the uptake of crypto assets by many Australians and the difficulty that they have with providing financial advice on crypto assets. We are conscious of the lack of research and the limitations with licensee standards and PI Insurance.
The first half of 2022 has been very volatile in the crypto asset space, with the collapse of some crypto assets and the recent termination of withdrawals by service providers. The price of Bitcoin has also more than halved since its recent peak. The next few months will be interesting to watch in the context of rising interest rates and an apparent move away from risky assets.
In our submission, we have advocated for introducing a regulatory regime to cover crypto asset secondary service providers and controls around those who seek to influence consumers with respect to crypto assets. This is clearly an area where some level of regulation is essential.
Please click here to see the AFA submission.
For any questions with respect to this submission, or to provide us with feedback on your thoughts about crypto assets, please email email@example.com.
Issued 16.06.2022. AFA Policy & Education Update
Stephen Jones appointed as Minister for Financial Services
SYDNEY: 2 June 2022 – The Associations of Financial Advisers (AFA) welcomes the news that Stephen Jones has been appointed as the Minister for Financial Services.
As the Shadow Minister for Financial Services over the last three years, Mr Jones has developed a sound understanding of the challenges facing the Advice sector, and in the lead up to the election has indicated his willingness to work with the sector to address these challenges in order to make advice more accessible and affordable for Australians.
AFA CEO Phil Anderson said, “The AFA looks forward to working with Minister Jones to achieve policy settings that enable better outcomes for consumers and to enable Financial Advisers to thrive. The Quality of Advice Review presents a significant opportunity to achieve a quantum leap in the state of the market. There are other important financial advice regulatory issues that we will seek to address with the Minister and his team.”
Candice Spence, General Manager Marketing, 0410 558 129, firstname.lastname@example.org
About the AFA
The Association of Financial Advisers Limited (AFA) has been the authentic voice on the value of financial advice for over 75 years. Today, the AFA is a vibrant, innovative association, where the underlying driver of policy is the belief that great advice transforms lives. To this end the AFA is striving to achieve the vision of Great Advice for More Australians. The AFA’s ongoing relevance as a professional association is derived from its success in engaging with the major stakeholders in financial advice including advisers, consumers, licensees, product and service providers, and the regulator and government. Culturally the AFA believes in the value of collaboration to create powerful outcomes and this drives how we achieve influence and work towards our vision.
Update on Quality of Advice Review
AFA News 12 May 2022. As the election campaign has progressed and with few new policy announcements on financial advice, it is evident that both sides of politics are awaiting the recommendations of the Quality of Advice Review (QAR).
At the AFA we have been very focused on the QAR. We have been participating with other associations in looking at the key objectives and identifying the recommendations that we can all get behind. We have also been talking to licensees to seek their input on the best solutions.
On 5 May 2022, we ran a member webinar to discuss where we are up to in our thinking on the QAR and to seek the input of members. This webinar is available on the AFA website, including a copy of the presentation.
In the webinar, we identified the overall objective of improving the accessibility and affordability of financial advice to both make financial advice available to more Australians, and also to help reduce the cost and complexity of running a financial advice practice. In our preliminary work, we identified a few key drivers of important change:
- Reducing regulatory uncertainty
- Regulatory relief
- Process re-engineering/improvement
- Retaining or increasing life insurance commissions
- Ensuring financial advice is a sustainable profession.
Please watch the webinar to see more about what our priorities are and to delve into the specific initiatives that might help to achieve these objectives.
We welcome member input on our current thinking and your thoughts on specific recommendations that you think will make a real difference.
A poll question asked during the webinar indicated that the level of optimism about what the QAR will deliver was mixed, with roughly as many being pessimistic as those who are optimistic. The reality is that with an absence of key policy announcements emerging during the election campaign, the QAR must be our biggest hope of addressing the current issues in financial advice.
Please click here for a copy of the QAR Terms of Reference.
Please click here for a copy of the QAR issues paper.
For any questions on the QAR, please email email@example.com
Issued 12.05.2022. AFA Policy & Education Update