The draft legislation for Tranche 2 of the Delivering Better Financial Outcomes reforms has raised concerns for The Advisers Association, particularly the regulations around intra-fund advice and collective charging.
The association’s submission to Treasury following the release of the draft bill in March said Michelle Levy and the government’s original intent to move to less-prescriptive regulation appeared to have been “lost in translation”.
Instead, the draft legislation introduces additional regulation-making powers for advice topics and circumstances to be taken into account and also “publishes a consultation note listing products” that will and won’t constitute intra-fund advice.
Additionally, the submission said the association’s members have “concerns about the inclusion of retirement products” in collectively charged intra-fund advice.
The association also criticised the nudges, or targeted superannuation prompts, introduced in the draft bill.
“Draft legislation makes it clearer it is not personal advice, but at the cost of more legislation and is less principles based,” the submission said.
It said the proposed changes will provide little benefit and in fact come at the cost of adding “significant penalties” for trustees who get the nudges wrong.
The overall response expressed the view that the proposed changes “do little to simplify the law” and are unlikely to make advice more accessible and affordable.
However, the reform to eradicate Statements of Advice and replace them with Client Advice Records has elicited a mixed response from the association, similar to the broader industry reaction.
The submission said there were positive elements to the reform as while the requirements are very similar to the SOA, they welcome the “customer focused intent” of the CAR as being to provide information to a client to help them make an informed decision and leaving the compliance to licensees.
However, the association raised concerns about how the CAR will actually work in practice and said it was disappointed about the lack of reduced prescriptive requirements.
“We are concerned with the interplay between the prescriptive list of requirements to be included in a CAR,” the submission said.
“The clients desire to have more personalised and scoped advice relevant to their particular situation, which would result in a better client experience and advice documentation aligned with the complexity of the advice and the client’s needs and level of knowledge.’
The submission said the association was hoping for “better recognition of professional judgement” and changes to Standard 6 of the Code of Ethics.
The Stockbrokers and Investments Advisers Association’s submission also found fault with the bill and requested the removal of Standard 6.
The SIAA submission also said it was difficult to provide a complete response to the draft legislation as it is missing reforms to the Best Interests Duty and safe harbour steps.
It also criticised the CAR and said although the reform could reduce the length of the CAR for comprehensive financial planning advice, it will not significantly reduce the length of the record for stockbroking and investment advice.
