FAAA to push minister on QAR, ASIC levy at Congress

Off the back of the release of the first Quality of Advice review draft legislation, Minister for Financial Services Stephen Jones will be pushed by the Financial Advice Association Australia on the next stages in a Q&A on the final day of the FAAA Congress.

Professional Planner is the media partner for Congress, which will be held on 20-22 November in Adelaide.

FAAA chief executive Sarah Abood will facilitate the Q&A and intends to push the minister on the timeline over announcing changes to Statements of Advice and the removal of the safe harbour steps from the Best Interest Duty, adding this reform is the “gamechanger” in terms of reducing the cost of delivering advice.

Jones told reporters on Monday afternoon the delay on those recommendations was because there a “few things to work through” but draft legislation will be due in the near future.

“It’s the big missing piece for our sector that’s come out of the Stream One reforms,” Abood tells Professional Planner.

“Certainly, something I’ll be addressing with the minister is how quickly we can expect to see those draft regulations. There would be concern if they’re being held up beyond what is absolutely necessary.”

FAAA head of policy Phil Anderson says the omissions aren’t surprising and that it was necessary to deal with it separately.

“There’s an interdependency between what’s in a statement of advice and how you establish compliance with the best interest duty because traditionally a lot of that confirmation of compliance with the best interest duty document is in the SOA,” Anderson says.

Anderson says it’s important to get specific policy details around this right because the industry needs confidence to fully enact the benefits of the reforms.

“If we leave them uncertain and anxious and how something could play out in the eyes of ASIC or when viewed by AFCA then we won’t reap the full benefits of this,” Anderson says.

“That’s why it’s really important that this is thought through very carefully and the ultimate result is nailed.”

A day before Jones and Abood take the stage, Anderson will co-host a session with the association’s senior manager government relations and policy George John on a policy update covering the QAR, ASIC levy, compensation scheme of last resort and adviser registration.

Along with QAR, the FAAA has flagged issues with the ASIC Levy and despite the announcement last week of a $400 per adviser cost reduction, Abood still wants more transparency over how costs are recovered.

“We’re pleased to see that, and pleased to see that the calls for that to be made more reasonable have been heard,” Abood says.

“Part of what we have been calling for is more transparency. Great that $8 million has come out but where did it go – and can we get more insight into the way the levy is calculated?”

Some wins on the board

While the Q&A with the minister will push on what is missing from the draft legislation, the association has welcomed what has been included.

Abood says the inclusion of Recommendation 8 to streamline fee consent into one document – which the association has long been vocal on – is a “big win”.

“It’s really, really important that we get that one done before the end of the financial year because I’m not sure how many advisers could stand going through that again,” Abood says.

In the exploratory memorandum released on Tuesday morning, the new fee consent forms will require the details of the person who is the fee recipient; an explanation of why the recipient is seeking the consent; the coverage period, cost and frequency of the ongoing fees; and information about the services that the client will be entitled to receive under the arrangement.

Additionally, a statement that an ongoing fee arrangement can be terminated by the client at any time will be required along with a statement that no further advice will be provided or fee charged if consent is not given.

The law will give the minister the power to approve the standard fee consent form, but product issuers will not be legally required to use them.

“Product issuers and advisers who chose to use a form would be able to rely on the form to meet their requirements in relation to consent,” the exploratory memorandum stated.

“However, the form would not be required or mandatory so as not to restrict product issuers who want to apply different rules or practices (in addition to the legislative requirements) to the payment of ongoing fees. Giving product issuers discretion whether to use the form allows flexibility to meet a variety of industry needs.”

The price is right

The draft legislation also confirms the stance on remuneration for various areas including super fund advice fees as well as crucially maintaining the current stance on commissions for life insurance at the current levels of 60 per cent up front and 20 per cent ongoing (Recommendation 13.7).

“That gives advisers certainty that it remains an acceptable form of remuneration for those who chose to use it,” Abood says.

The retention comes after QAR lead Michelle Levy recommended keeping commissions at the same level with the minister announcing he had softened his stance on risk commissions after previously taking a hardline opposition to it.