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In the final quarter of 2020 there were many important policy announcements for the financial planning profession. With so many changes coming at the end of a very eventful year, here is a summary of changes to bring you up to date for the start of the year.
The end of FASEA
On 9 December 2020, Senator Jane Hume announced that FASEA will be wound up, with its standard-making functions taken over by the Treasury. Other FASEA activities, including administration of financial planning exams, will be included in the mandate of the Financial Services and Credit Panel (FSCP) within ASIC.
Following this announcement FASEA have confirmed that “the legislated timeframe for existing advisers to pass the FASEA exam by the end of 2021 has not changed and encourages advisers who have yet to pass the exam to continue their studies and sit the exam.”
RG246 effective from 1 January 2021
Under the terms of ASIC Regulatory Guide 246, compliance with the conflicted and other banned remuneration provisions came into effect on 1 July 2013. From 1 January 2021 any conflicted remuneration that had continued to be paid under ‘grandfathering’ arrangements is no longer permitted.
Draft Financial Planners & Advisers Code of Ethics Guide Released by FASEA
In October 2020, FASEA released a draft of the Financial Planners & Advisers Code of Ethics Guide for feedback and comment. The guide has been designed to help financial planners better understand the standards and values included in the Code of Ethics and how they should go about applying them in providing financial advice to clients. It uses fundamental questions to help illustrate the Code and highlights the need for financial planners to exercise professional judgement in the best interests of clients and guided by the values and standards of the Code.
Government response to the 2019 Review of the Tax Practitioners Board (TPB)
On 27 November 2020, the Morrison Government released its response to a 2019 independent review of the Tax Practitioners Board. Their response supports – in full, in-part or in principle – 20 of 28 recommendations made in the report.
Government report on the Retirement Income Review
This report is based on the findings of the Retirement Income Review conducted in 2019/20 by an independent panel appointed by the Treasurer, Josh Frydenberg MP and the Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume. The review covers the current state of the system and how it will perform in the future as Australians live longer and the population ages.
In their remarks in a cover letter to the Treasurer with the report, the panel concluded that “evidence indicates that the Australian retirement income system is effective, sound and broadly sustainable. But it can be improved.”
ASIC Consultation Papers
In November 2020 ASIC issued two new consultation papers, inviting feedback and submissions on two areas of legislative reform for financial advice:
CP 332 Promoting access to affordable advice for consumers
Released 17 November 2020. Comments closed 18 January 2021.
In this consultation paper, ASIC invites comments and ideas on problems that limit access to affordable advice and potential solutions to these challenges. This includes identifying unmet advice needs and barriers that exist to meeting those needs, as well as providing scaled advice.
CP 333 Reference checking and information sharing
Released 19 November 2020. Comments close 29 January 2021.
Strengthening reference checking protocols is an important recommendation to come out of the Hayne Royal Commission. This consultation paper seeks to capture feedback from the industry on proposed protocols for licensees to do thorough background checks on financial planning recruits.
The FPA has consulted with members and made submissions to ASIC in response to both these consultation papers.
Royal Commission legislation released
On 12 November 2020, legislation was introduced to address 20 recommendations and one additional commitment from the Hayne Royal Commission. This legislation package was passed by Parliament on 10 December 2020 and is designed to further protect consumers by:
Strengthening the unsolicited selling (anti-hawking) provisions, including for superannuation and insurance products, to prevent pressure selling to consumers;
Introducing a deferred sales model for add-on insurance products, to promote informed purchasing decisions and prevent inappropriate sales of add-on insurance;
Making the handling and settlement of insurance claims a ‘financial service’, which will require insurers to behave honestly, efficiently and fairly and comply with other licensing obligations, to improve claims handling practices (under new regulations, financial planners will be exempt from additional licensing requirements);
Prohibiting the trustee of a superannuation fund from having a duty to act in the interests of another person, other than those arising from their duties as trustee of a superannuation fund; and
Allowing provisions in financial services industry codes to be enforceable, with breaches attracting civil penalties, ensuring better adherence by industry and certainty for consumers.
A further package of legislation was introduced to Parliament on 9 December 2020. These legislative reforms are focused on the following outcomes:
Strengthen and simplify the ongoing fee arrangement framework in the Corporations Act 2001to minimise the risk that these types of arrangements give rise to fee for no service conduct;
Amend disclosure requirements to ensure that financial advisers disclose whether they are independent; and
Ensure that only fees for one-off financial advice can be deducted out of MySuper accounts.