The Stockbrokers and Investment Advisers Association has called on the government to make sure there will be regulatory clarity over satisfying the Best Interests Duty once the safe harbour provisions are removed the duty.
“We’ve highlighted to Treasury our members concerns that once the safe harbour has been removed advisers and licensees will require regulatory certainty about what advice will satisfy the new Best Interests Duty,” SIAA policy manager Michelle Huckel said at the SIAA conference in Melbourne on Tuesday morning.
“In other words, they’re going to need a measure against which they can judge the content rather than the process of the advice.”
The Quality of Advice Review recommendations to remove the safe harbour steps from the BID, along with the new advice record that will replace Statements of Advice, was left out of the initial QAR legislation with Minister for Financial Services Stephen Jones saying it needed to be handled separately as the two issues were entwined and too complex to be part of the first tranche of legislation.
“When it comes to a new advice record, we’ve told them that we support a principles-based record that’s clear, concise and effective, and assists the client to make an informed decision on whether to act on the advice,” Huckel said, acknowledging the bill is yet to be released in draft form.
On the more controversial aspects of the Government’s modified QAR reforms, Huckel said there has been a “divergence of views” within the association’s membership over the proposed class of “qualified advisers” that would be employed by super funds to give restricted advice.
While the boundaries of the advice that qualified advisers could give has been a point of contention, the new class of adviser generated much of its notoriety due to the name, which the minister acknowledged can be changed.
“One the one hand, large online brokers already operate call centres and they’ve got trained staff providing information and general advice to clients already,” Huckel said.
“They’re concerned that if the existing framework for financial advisers is imposed on this new adviser class simple and episodic advice will be too costly and complex for them to provide.”
However, members who provide holistic advice are concerned qualified advisers will introduce “risk and confusion” for consumers.
“We’ve highlighted the complexity of this issue with Treasury,” Huckel said.
When it came to the legislation before parliament, Huckel welcomed the modification to the bill to allow ministerial discretion to approve a mandated fee consent form but highlighted the SIAA’s concerns with the oversight rules for deducting advice fees for super accounts.
SIAA was part of the JAWG media statement that criticised the wording of the bill, which has faced similar criticism from the Joint Licensee Group, but support from super funds and their associations.
Huckel said consumers will face more red tape when it comes to setting up an ongoing adviser arrangement with super funds to pay for advice.
“We’re concerned in the proposed legislation that super trustees that allow fee deductions might need to check every piece of advice individually and duplicate valid checks already undertaken by financial advisers and their licensees,” Huckel said.
“We’ve asked the government to make changes to the legislation to provide a way forward that’s not unworkable and worse for all than the current situation.”
The association reiterated its opposition to wholesale investor test changes, which include raising the thresholds of what constitutes a wholesale investor and is currently sitting before a parliamentary committee.
“We pointed out the regulatory distinction between retail and wholesale is applicable to a range of circumstances in the financial services sector and has much broader implications than just for managed investment schemes,” Huckel said.
“We recommended any review of the wholesale client definition should be subject to a standalone consultation to enable participation by all relevant industry stakeholders to ensure it takes into account all possible consequential impacts.”
Laying the new pathway
SIAA chief executive Judith Fox said the association has been working with JAWG on an improved new entrant pathway, changes which the government has been open to implementing.
Fox noted the end of last year still only had 381 new entrants in the entire financial advice sector, although research from Wealth Data put that figure at 383.
“We know there are very few professional year candidates currently progressing with our member firms so the number of new entrants will not replenish the number of advisers who are going to be retiring over the coming years,” Fox said.
“Growth of adviser numbers is impossible under the current education regime. SIAA has worked for many months with the other advice associations that comprise the Joint Associations Working Group… to develop a proposal to take to government to change the education standard for financial advisers.”
Fox said the government and opposition have both recognised the current state of the financial advice “is not sustainable” and indicated the minister and Treasury has been open to reform.
“Importantly, the proposal introduces flexibility to the current very prescriptive education pathway and it takes into account the very broad financial advice ecosystem,” Fox said.
“It recognises the current one-size-fits all approach that FASEA put in place is deterring new entrants and that change is needed.”
The government had sought feedback earlier this year on draft legislation to promote greater flexibility for tertiary education requirements.
Silver jubilee
The association is celebrating its 25th anniversary and Fox said since the last conference the association has held 112 government and stakeholder meetings, along with producing 12 policy submissions.
The association has participated in 26 meetings for the QAR, 23 meetings on the ASX’s CHESS replacement project to update the exchanges clearing and settlement system, along with 19 meetings on a proposal that has gone to government to change the education standard to broaden the aforementioned new entrant pathway.
“We’ve had multiple engagements with government and opposition, and we have a consistent ongoing conversation with all sides of politics,” Fox said.
“We’ve also appeared before parliamentary committee on a range of issues. We are out there ensuring your voice is head.”
