Advisers will have a further six months to prepare for oncoming reforms stemming from the Hayne royal commission after Treasurer Josh Frydenberg announced a deferral of “associated” commitments as a result of the coronavirus crisis.
On Friday Frydenberg published an update to the ‘Implementation Roadmap’ released by the government in August last year, pushing measures scheduled to be introduced on June 30 back to the end of the year and those scheduled for the end of the year into mid-2021.
“The deferral will enable the financial services industry to focus their efforts on planning for the recovery and supporting their customers and their staff during this unprecedented time,” the Treasurer stated.
For a financial advice community stretched by rigorous market volatility and a host of client issues stemming from the coronavirus, the fresh timeline gives a welcome respite from the cost and complexity involved with preparing for the associated reforms.
“This announcement today balances the need to implement the recommendations of the Royal Commission with the need to ensure our financial institutions are in a position to devote their resources to responding to the significant challenges posed by the coronavirus,” Frydenberg added.
Delaying the move from biennial to annual client contract renewals – which was due to start in roughly seven weeks – will be particularly impactful for advice practices, though it is likely many have already committed to the adjustments given the late call from Frydenberg.
Also taken off the list for June 30 is the prohibition of advice fee deduction out of superannuation funds.
The implementation delay validates the pleas of industry stakeholders last month for product providers to hold off on getting ahead of this legislation.
Other provisions delayed from June 30 relevant to advisers include the enforceable code provisions for conduct and the ‘lack of independence’ disclosure.
The new disciplinary system for financial advisers, slated to introduced by the end of 2020, is now scheduled for mid-2021.
Financial Planning Association chief, Dante Di Gori, welcomed the six-month delay with the caveat that the government should remain “open to reviewing the timeline” due to the unknowns inherent in the coronavirus crisis management plan.
“We look forward to recommencing discussions with the Government about how some of the reforms could be better amended to reduce over regulation and red tape,” De Gori noted.
Dismantling reform fears
The delay comes amidst growing concern in the financial advice community that while the royal commission provided an appropriate platform to root out misconduct, it was not a balanced platform from which to base wholesale reform across the industry.
While the reforms remain on the table, the extension could be seen as a step toward a dismantling of the reform agenda senior policy experts called for recently.
When Frydenberg initially announced the government’s ‘roadmap’ it committed to all of Commissioner Hayne’s recommendations. Of the 54 that were directed to the government (12 went to the regulators and 10 to industry), 24 have already been implemented.
At the Professional Planner‘s Retirement Conference in March, Jane Hume, the assistant minister for superannuation, financial services and financial technology, stopped short of commenting on a moratorium on new regulation for advisers, but hinted that an official delay was forthcoming when she noted that the government wasn’t meeting until at least August.
Despite her reluctance to commit at that stage, Hume confirmed the government was “putting its head around” ways to make advice more affordable and acknowledged the “urgent need” for reform in the crisis.
“We will be exploring ways to ensure advisers can speak to their clients to ‘calm the farm’ as much as they possibly can without being concerned about breaching their regulatory requirements,” Hume said. “We’re working with ASIC to do exactly that.”
ASIC on board
On the same day as Frydenberg’s announcement, ASIC said it was delaying the commencement date of its mortgage broker best interest duty and remuneration reforms, as well as the incoming design and distribution obligations, a further six months.
The mortgage broker reforms will now commence in 2021, with the ‘D & D’ obligations kickstarting on October 5 next year after what will be an extended two-year transition period.
“ASIC has deferred the commencement dates so industry participants can focus on immediate priorities and the needs of their customers at this difficult time,” the corporate regulator stated.
This comes less than a month after ASIC loosened compliance around ‘crisis’ superannuation advice, with measures allowing for the provision of advice regarding early access – but only for a cost of up to $300 – being viewed as a step in the right direction but largely impractical.