Amidst the rapidly escalating coronavirus crisis, calls are growing for a 12-month moratorium on new regulation for the industry so that advisers can focus on guiding clients and safeguarding their businesses.
Advisers are experiencing a surge in client queries due to exceptional levels of market volatility and other concerns as the nation deals with the fallout of the coronavirus.
At the same time, the government is sitting on a raft of scheduled regulatory changes to the advice industry stemming from the Hayne royal commission, in particular the tightening of ongoing service agreements from every two years to every 12 months.
This annual opt-in rule – which requires “fee recipients” to disclose in writing past and future fees for 12 months, as well as obtain written consent for fees to be deducted from the client’s account – is widely believed to be the most significant impost on advice practices and the one that will require the most time, effort and cost.
The Association of Financial Advisers’ chief executive, Phil Kewin, called for a delay on the implementation of annual opt-in rule before the coronavirus erupted due to the “sheer weight of regulatory change” advisers are facing.
“You’ve got to approach things in the right way and with common sense, Kewin tells Professional Planner. “But now it’s even harder to meet with clients, so it absolutely makes sense to defer the change.”
While he acknowledges that the authorities have significant other issues to deal with at the moment, Kewin also believes advisers would also be better served if another regulatory amendment – the extension of FASEA’s exam and education requirement cut-off dates – is ratified in parliament.
As it stands, existing advisers are still required to have the FASEA exam completed by January 1, 2021, but the Assistant Minister for Financial Services, Jane Hume, has announced an extension of this by one year. The Bill passed the House of Reps on February 11 and is waiting to face the senate.
“The amount of work advisers have to do on this regulatory transition, as well as the exams – this just reaffirms the necessity of a delay,” Kewin says.
The CEO says he understands that there are more pressing matters for the government and Australian society at large.
“I don’t think that’s opportunism, it’s just common sense,” he says. “There’s an assumption that [regulation] needs to be implemented as soon as possible, but the world has changed.”
Jonathan Hoyle, CEO of self-licensed Sydney firm Stanford Brown, says while he is “highly supportive” of the move towards professionalism, the coronavirus is putting straining practices under too much pressure to accommodate further business upheaval.
“I am strongly of the view that there must be a 12-month moratorium on all major regulatory change,” Hoyle says. “In particular, any changes to client service agreements, such as FDS, Opt-In and Ongoing Service Agreements.
“We must also defer for now any strict legal interpretations of the Code of Ethics. We and our clients are in a fight for survival. Now is not the time for significant disruption,” Hoyle continues.
Dante De Gori, the chief executive of the Financial Planning Association, says it’s important at this juncture that “all options are on the table”.
De Gori says they have already lobbied for confirmation on the education cut-off date extension, which needs to happen as soon as possible. The exam date remaining as it is would be a “logistical nightmare” for practices, he says.
Regarding a regulatory moratorium for 12 months, De Gori is more measured, noting that the legislation still waits on approval from the Senate.
“It’s fair to say the government has a lot on its plate, and the focus has to be on the health and wellbeing of the population,” De Gori says. “The royal commission roadmap… all those reforms are now subject to whatever events are in front of us.
“Again, all of these things haven’t been legislated. There is nothing that needs to be implemented on July 1 yet. I mean, is parliament even going to sit? I’m not saying no, I’m just saying we need to keep all options open.”
Senator Hume’s office has been contacted for a response to the calls for a delay in regulation implementation but has not responded at time of publication.