Advisers who think 2019 was a challenging year for adapting to new rules and regulations will likely be in a world of pain next year with the next tranche of the government’s new rules coming to roost as it plans for a major industry review in 2022.
New legislation enforcing Hayne royal commission recommendations relating to annual review and payment for financial advice will be introduced in the first half of next year, as will legislation relating to disclosure of independence, reference checking and licensee obligations to report concerns and misconduct of their representatives, according to a government implementation plan.
By the end of next year a new disciplinary system for financial advisers will be enshrined in law, the plan outlines.
New legislation relating to the engagement and payment of financial advice, along with the licensee obligation rules, independence disclosure rules and formalisation of a disciplinary system comes on heels of new legislation introduced at the start of this month to end grandfathered commissions for financial advisers by 2021.
The raft of new legislation to come in next year will be followed by a significant review of the financial advice industry to be conducted by the Australian Securities and Investments Commission (ASIC) in 2022, the government has outlined.
The governments actions in coming years represents “the largest and most comprehensive corporate and financial services law reform package since the 1990s,” the country’s Treasurer Josh Frydenberg stated as part of his preamble to the government’s implementation plan of the Hayne royal commission’s recommendations, released on Monday.
“The Government committed to take action on all 76 of the Royal Commission’s recommendations and, in a number of important areas, go further,” Frydenberg highlighted.
Of the Royal Commission’s 76 recommendations, 54 were directed to the Government, 12 to the regulators and 10 to the industry. Of the 54 recommendations directed to the Government, over 40 require legislation, Frydenberg highlighted.
Formalisation of the government’s strategy to implement Hayne’s recommendations follows a record level of funding allocated to financial regulators in the 2019-20 budget.
ASIC received an increase of 25 per cent on average in its annual budget over the forward estimates compared to 2017-18 and APRA received an increase of 30 per cent on average in its annual budget over the forward estimates compared to 2017-18, the government has highlighted. Combined the two main financial industry regulators, which are increasingly working together on enforcement matters, have received $556.5 million in funding in the current financial year.
“Both ASIC and APRA have committed to act on the Royal Commission recommendations directed to them and have publicly announced their planned actions for each recommendation and the matters referred to them for investigation,” Frydenberg noted in the government’s implementation plan.
While the industry has moved early to adapt business models in light of Hayne’s recommendations and in advance of the impending legislation, many of the changes are still taking effect.
IOOF has announced changes to ongoing service agreements across its vast adviser network to take effect for new clients beginning at the start of next year; all advice networks both large and small will need to follow suit to fall into line with annual renewal and payment for advice legislation to be introduced mid next year.
Introduction of new legislation addressing Hayne’s “2” series of recommendations next year and the year after will lead into a comprehensive review of the advice sector designed to judge the industry’s adherence to the new rules and its improvement in the quality of advice.