Despite legislation having passed in the middle of the year, industry consultation has yet to achieve consensus on a standardised fee consent form.
In a webinar on Wednesday, Financial Advice Association chief executive Sarah Abood said the industry is working closely with the Treasury to co-design and “ensure that we have the design parameters agreed and the elements of the form”.
“We are fighting very hard for a standardised form to be used,” Abood said, noting the association had working on a submission with the Joint Associations Working Group to make sure product issuers use the same form and the same processes.
“If they don’t, we’re obviously back in the same position that we were before when advisers and their clients have to sign a range of different forms at a range of different times with a range of different methods.”
The requirement to have clients sign annual fee consent forms was introduced after the Hayne royal commission, but has only added to red tape for no beneficial consumer outcome and has received heavy pushback from the industry, particularly the FAAA.
The Quality of Advice Review recommended streamlining fee consent forms into one standardised document to help simplify the process across different platforms.
This recommendation was included in Tranche 1 Delivering Better Financial Outcomes legislation which added ministerial power to approve a mandated form if the industry if necessary.
“What does it need to cover? What attestations are required? What is the process to ensure that client consent is obtained and that product issuers can rely on the process,” Abood said.
The association is also advocating for the form to be digital, if possible, to improve security and efficiency.
“We are digital first, even though we understand that there are clients out there who aren’t very comfortable with digital methodologies,” Abood said.
“Over time, people are becoming more confident with digital and it’s far more efficient for a business to use cyber, secure digital processes. We’re advocating hard for that, while understanding that there’ll always be a need for some kind of manual form.”
Getting all parties aligned
Abood talked about the impact and the role the super funds have on fee consent, particularly the funds’ obligations to confirm that a fee that’s being deducted is in accordance with the sole purpose test.
“There was a lot of concern that super funds would be routinely requesting Statements of Advice or letters of engagement, ongoing service agreements in order to validate the fee for every arrangement,” Abood said.
Abood was referring to the controversy in Tranche 1 of the DBFO legislation over section 99FA of the Superannuation Industry (Supervision) Act which quickly derailed the advice reform process and pitted the advice profession against the superannuation sector over the parameters of the reform.
While the wording of section 99FA was modified to clarify that super funds would not be auditing every SOA, Abood said the association wanted to work with the super funds to make sure everyone is aligned on the implementation of the reform and expected to have more discussions with the Treasury in the new year.
Abood and FAAA chair David Sharpe also discussed the positive and negative implications of the second tranche of the DBFO, in particular the controversial ‘new class of advisers’.
Push to keep retirement for holistic advisers
During a briefing earlier this December, Minister for Financial Services Stephen Jones explained licensees will be free to employ the so-called new class of adviser, offering an olive branch to the advice profession who felt the new class would not offer a level playing field.
“We’re really pleased to see that the other thing we’ve advocated for that was good to see is that advice firms are able to offer this class of advice if they wish, and they will be able to change for it if they wish,” Abood said.
The new class of advisers will only be able to give advice on APRA-regulated funds and require AQF5 level education which is equivalent to a diploma.
However, the minister’s office previously confirmed to Professional Planner this will be a higher education diploma which is regulated by TEQSA who regulate universities and similar education providers, meaning it is more likely to offer a pathway into a relevant degree.
The association holds the stance that the new class of advisers should not be allowed to deliver retirement advice due to the area’s complexity and level of risk.
“It is this notion that retirement advice would be offered and would be collectively charged that we’re pretty opposed to,” Abood said. “The documents that we saw the other week don’t speak to this.”
Retirement advice requires the adviser to collect much more information about the member than super funds already have.
“Advice you give around retirement has tax implications, Centrelink implications, cash flow implications, estate planning,” Sharpe said.
“It’s not something for someone at an AQF5 level with a few months experience at a product provider, to be able to provide such complex advice.”
While the association opposes the new class of adviser being allowed to offer retirement advice, Sharpe said the association supports the principle of its purpose, to deliver advice on so-called simple topics.
“The very, very simple stuff, we are actually supportive [of], because we think people need that advice, and it’s probably not an area that our membership are looking to engage in,” Sharpe said.
