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With Treasury’s latest consultation on the Single Disciplinary Body, we’re seeing important steps being taken towards simplifying the regulatory framework for the financial advice profession.
Since the draft was released in April 2021, our FPA policy team have been working on our submission to the Treasury on proposed legislation for the Single Disciplinary Body (SDB) for Financial . Not only does this regulatory reform promise to provide FPA members and financial planners with fewer regulatory bodies to register with and report to, there are also a number of other amendments and measures packaged up with this legislation that are important to the future of our profession.
For the SDB itself, the framework outlined in the draft and how it will be operated by the Financial Services and Credit Panel (FSCP) is broadly in line with the code monitoring body recommendations from the Royal Commission. Given that this takes the SDB down a path outlined in the FPA’s Policy Platform document, we welcome the proposed approach.
Suggested changes to the SDB
An amendment we would like to see is on panel selection for the SDB. It is important for financial planners themselves to be involved in making decisions about the ethical conduct of financial planners and providing feedback to the profession as a whole. We also have significant concerns about how the SDB will be funded and the limited details available in the draft on the cost recovery model. Given the recent situation with year on year increases to the ASIC Industry Funding Levy, it’s very important to have clarity on this and we included this in our submission to the Treasury.
Another area where our team have made recommendations is around the registration process under the proposed arrangements. As is to be expected, there will be a requirement for financial planners to provide extensive information to the SDB. In cases where a planner operates through a licensee, it will be up to the licensee to submit this information. Our team questions whether this is appropriate and suggest that the whole process should be completed by financial planners as individuals.
Overall, the proposal to divide FASEA standards and responsibilities across the Treasury and ASIC is reasonable and viable. However, one area of concern is around the volume of information FASEA has been providing. With their many other areas of responsibility, it may be unrealistic to expect these two bodies to maintain the same level of engagement and responsiveness on updates to education standards, codes of conduct and ethics.
For example, the legislative instrument in relation to education standards is updated twice a year with new courses and other relevant changes. However, FASEA had also been reliable in providing ad hoc updates to the profession as changes were adopted. While not a major concern, if Treasury stop sharing these smaller announcements it will take financial planners far longer to get certainty on choices for their professional education.
The transition to ASIC and Treasury also calls into question whether they have the skillset and experience within their teams to monitor and revise standards that are practical and effective in protecting consumers and upholding quality of service in financial advice. This is why we are asking for advisory bodies to be included in the new legislative framework for professional and education standards. This could be an advisory panel drawn from an existing entity, such as FPEC. The important issue here is to have individuals who have a grasp of financial planning in practice and can advise on the impact of changes in standards. This will be critical to successful outcomes for the ongoing professionalisation of financial planning.
Regulation of tax financial advice
Finally, there is the proposal to remove the requirement for individual financial planners providing tax advice services to be registered with the Tax Practitioners’ Board. However, registration will still be required for licensees and therefore compliance with TPB regulations will still be a requirement for individual planners. In our view, a simple approach which removes this requirement for delivery of all finance advice is the way forward, with the new SDB expected to include tax experts on their panel to review disciplinary matters relating to tax advice.
With Treasury intending to introduce this legislation by 30 June 2021, we’re not expecting significant changes to the draft released. However, we hope that these few improvements suggested to refine the framework to support better standards and the ongoing evolution of the profession will be taken up by government.