Amended regulations to the Corporations Act (Streamlining of Future of Financial Advice) Bill 2014, put forward by minor parties in the Senate, could increase red tape for financial planning firms for little consumer protection benefit, according to the SMSF Professionals’ Association of Australia (SPAA).
Jordan George, SPAA’s senior manager of technical and policy, told the association’s State Technical Conference in Sydney yesterday that the amendments largely restate financial planners’ existing legal requirements.
“A lot of it is restating existing requirements of law into SoAs – things about the best interests duty, the cooling-off period, things like that,” he said.
“It will be interesting to see what those regs look like because that could add a fair bit of compliance for not a whole lot of benefit. We just need to keep an eye on what those regs are going to look like when they are introduced to parliament.”
Streamline
George said one of the government’s election promises was to “streamline and reduce obligations under FoFA for advisers”.
“That’s been quite controversial and also it’s been reasonably difficult for them to get through parliament,” he said.
“We had a frenetic week in parliament where the Labor Party, together with the Greens and other senators actually managed to get enough numbers to table the regulations themselves, so they could then try to disallow the regulations.
“It’s happened a couple of times in parliamentary history, but it’s an unusual occurrence. However, the government got the Palmer United Party to side with it and they got enough votes to survive the disallowance motions. The regs just have to sit in parliament until September 30 to survive; if the Palmer United Party sticks with the way it voted originally, we will see these are the regs that get passed.”
Surprising
Speaking to Professional Planner, George said the government’s acceptance of the minor parties’ amendments was “surprising in that it enhances [the government’s own] amendments to a certain degree, but it may not add much more integrity than they’ve already got there”.
“The register of advisers is a positive move; and that’s something that FSI also said they think is good,” George said.
“We support that because it’s a really good integrity measure, and if you can get the public aware of it, for consumers it’s definitely a good option.
“But on the other set of amendments around the SoA, I guess what’s important in that is you can alert client attention to it in the SoA, and it may give them some comfort that they didn’t have to go off and read the Corporations Act to understand what their remedies are and what the cooling-off periods are.
“Putting it in the SoA puts it right in front of them so from that perspective it does strengthen it for consumers. I can understand why the government would agree to those amendments, because while they may not be large-scale amendments, they do still have some reinforcing qualities. It’s in the SoA, it’s in front of the client, and the adviser can go through the SoA saying here are your rights; I believe this [advice] was given in your best interests.”
Ease compliance burden
George said it may ease a potential compliance burden if the government were to prescribe the wording that must be used in SoAs.
“I think that would be helpful, and we’ll see what the regulations and any accompanying explanatory material will look like,” he said.
“That will give us – hopefully – some guidance as to what words are required. Ninety days they said they’d make regulations in, so we’ll just wait and see.”
George said SPAA welcomed the approach of the Financial System Inquiry (FSI) to the SMSF sector.
“I think the stand-out thing for us was the FSI said the SMSF sector is reasonably well functioning; it’s important for consumer choice and competition; and it took a light touch to the sector, only looking at a couple of issues,” George said.
Competency
“They recommended that if you’re providing a type of advice in a certain sector, you have the equivalent competence. So if you’re providing SMSF advice, you should have a specialist SMSF competency undertaken as part of your training.
“That makes sense to us. Even with ASIC and RG146, we’ve been arguing that you have a superannuation competency which has some SMSF it in; we would love to see an SMSF competency, in addition to super, because it is distinctly different.
“We fully support that and will work with the FSI to make it look like something reasonable.”
