AFA News 02 March 2021. On Thursday 25 February 2021 the Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020 was passed in the Senate.  It will shortly receive Royal Assent and will be law from 1 July 2021.  This is a particularly significant reform for financial advice, introducing the Annual Renewal requirement, which will add significantly to the administrative workload of financial advice practices.  We argued hard for some sensible enhancements to the law, however, the Government were determined to push it through without any amendment.

There are three key parts to this Bill:

• Annual Renewal. The most significant part of the Bill is the introduction of an Annual Renewal requirement for all ongoing fee clients (both pre and post FoFA clients). This will require issuing a combined FDS and renewal notice that will not only include fees and services over the last 12 months, but also fees and services expected over the next 12 months. Advisers will have up to 60 days from the Anniversary date to issue the new combined FDS statement and clients will have up to 120 days from the Anniversary date to renew.  In addition to the Annual Renewal process, Financial Advisers will be required to provide copies of client consent forms to product providers each year.  The new regime starts on 1 July 2021, however there is a 12-month transition arrangement that provides some flexibility in the provision of the first new FDS.  This is a complex arrangement, which we will explain separately.
• Disclosure of Lack of Independence. This provision will require changes to Financial Services Guides by all advisers other than those who comply with the very strict requirements of Section 923A of the Corporations Act, for the use of the terms ‘independent’, ‘impartial’ and ‘unbiased’ or like terms.  Where required, the new disclosure will need to include a statement that the adviser is not independent and set out all the reasons why the adviser does not meet the requirements of Section 923A.  The new requirement commences for the purpose of the provision of a financial service from 1 July 2021 and can either be done by the provision of an updated Financial Services Guide or by the provision of a Supplementary Financial Services Guide that provides the disclosure statement.
• Deducting Advice Fees from Super. The key additional impact with this part of the Bill is that it will only be possible to charge once off financial advice fees from MySuper accounts from 1 July 2021 for new MySuper clients and from 1 July 2022 for existing MySuper clients.

ASIC is now responsible for the issue of templates for client consent forms and for the nature of the Disclosure of Lack of Independence.  We expect ASIC to release these materials, along with further guidance on the requirements, shortly.

We will discuss the requirements of this reform in some detail during our AFA Member Update webinar on 10 March 2021.  Please make sure that you register for that webinar here.

For any feedback or questions on the Hayne Royal Commission Response No. 2 Bill, please email policy@afa.asn.au

Issued 02.03.2021. AFA Policy & Education Update