The Financial Advice Association has labelled parts of the first batch of long-awaited legislation designed to restore faith in the financial advice industry as being unworkable.
The industry has raised issues with first tranche of Quality of Advice Review legislation over the burdensome conditions that will need to be met for trustees to allow advice fees to be charged from a member’s account.
In a policy update webinar on Thursday, FAAA chief executive Sarah Abood said the wording of the legislation adds red tape in areas where it doesn’t currently exist.
“We strongly opposed a requirement for super fund trustees to check all advice documents to confirm that advice fees are being charged consistent with the Sole Purpose Test,” Abood said.
“This would be both an administrative and privacy and consent nightmare, ultimately, clients pay for inefficient laws.”
Abood said the government has taken on feedback regarding fee consent which recognises the prospect of consent being provided electronically. She also acknowledged that Fee Disclosure Statements would no longer be required unless clients requested them.
The association also acknowledged that the minister would have the power to mandate a standardised form, but noted there will be pushback from product providers who won’t be willing to invest in upgrading their systems.
The bill has been referred to the Senate Economics Legislation Committee. The FAAA will be making a submission to the SEC and continuing to be advocating for a fix to the superannuation trustee advice approval issue, FAAA general manager of policy Phil Anderson told members.
It is hoped the legislation will be resolved when both houses sit again between 24 June and 5 July, so that these new arrangements can be rolled out.
Members tuned into the webinar were also bought up to speed on the Compensation Scheme of Last Resort, which has also ruffled feathers within the FAAA.
While Abood said the association doesn’t oppose the scheme, it is calling for an independent inquiry into how it is funded.
Of particular concern is how the government has sidestepped the commitment to fund the first year of the scheme and is instead only funding the first three months, along with how advice practices will be left footing the bill for Dixon Advisory claims.
“This black swan event was much bigger than anyone could have imagined [and] the government will only be paying for about three months of the scheme to run despite promising to pay for it for the first 12 months,” Abood said.
“The parent company of Dixon Advisory, E&P Financial Group, have walked away and left this huge problem, and it’s not fair that our industry has been left to pay for the mistakes of a large listed group retrospectively,” Abood said.
Anderson said that government disclosures around the CSLR have been “very disappointing”.
“We’re not too happy. Costs are unclear, and the government has refused to do a regulation impact statement, which has left us with very little understanding of what this legislation might mean,” Anderson said.
“We have been doing our very best to get to the bottom of this scheme and how it will work for some time. It’s complex and the explanations have been quite poor, and we are really angry about how all of this has landed.”
As it stands, advisers are expected to pay a CSLR levy of $1286 in FY25.
“The cost of advice is a really major issue, yet it certainly seems that so many things are happening that are doing the exact opposite [of bringing costs down], and many members will be forced to pass further costs on to their members,” Abood said.
“We can’t write open cheques and it’s completely unfair that members of today are being asked to pay for the mistakes of firms in the past.”
