In a surprise move that isn’t in line with industry sentiment, shadow financial services minister Stephen Jones has dismissed the idea of eliminating safe harbour steps.
Speaking at a webcast hosted by the Financial Planning Association Monday morning, Jones said any move to abolish safe harbour steps would be “completely wrong-headed”.
“The Financial Services Council have pitched a proposition to me and others that the answer is just to remove the safe harbour rules,” he said. “The safe harbour rules were designed as a beneficial rule for advisers.”
“They have then spawned a whole bunch of regulator provisions,” he continued. “The safe harbour rules are not the problem; they are there to protect advisers. That’s their purpose – to protect advisers, not to direct advisers and spawn mountains of reforms in the delivery of advice.”
The FSC proposed eliminating the safe harbour steps in its advice green paper last year. Introduced in 2013, the safe harbour steps are designed to ensure the client’s Best Interest Duty has been met.
It was argued advisers already have the Code of Ethics which could be used as the “single tool” to satisfy Best Interest Duty.
“The Code of Ethics’ primarily would be strengthened by removing the safe harbour steps as the financial adviser would be obliged to meet the Best Interests Duty based on their own ethical approach, rather than an administrative process,” the FSC stated in the green paper.
The safe harbour provision for the best interests duty is likely to be removed in line with Commissioner Hayne’s recommendation that “unless there is a clear justification for retaining (the safe harbour provision), it should be repealed”.
Will this be another risky flip-flop
The announcment is a surprise policy call from Jones who announced last week a change of tone on risk commissions at a breakfast hosted by the FSC.
After years of expressing his disdain for commissions as a method of remuneration of risk advisers, Jones said his view changed after consultation with the industry.
On the FPA webcast, he expanded on his decision to change his position on commissions and said he wants to ensure that risk products can be distributed in an efficient and safe way.
“When people ask me the impact of engaging and consulting I cite this as an example,” he said. “If we start passing the direct cost of advising and distributing life insurance policy onto a retail customer, we’ll see a lot less retail customers getting life insurance.”