Financial advisers have scored some small gains out of the Government’s Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020 which was introduced to the Parliament today with a relatively simple approach to annual fee disclosure statements and advice fees in superannuation.
The legislation has been delivered conditional welcome by the Financial Planning Association (FPA), the Association of Financial Advisers (AFA) and the Association of Superannuation Funds of Australia (ASFA).
On fee disclosure the legislation requires advisers to provide clients with a single document each year which outlines the fees that will be charged and the services which the client will be entitled to in the following 12 months and which seeks annual renewal from clients for all ongoing fee arrangements. It also obliges them to obtain written consent before fees under an ongoing fee arrangement can be deducted from a client’s account.
The explanatory memorandum noted that: “The provision of one document, the fee disclosure document, with all of the relevant information about fees, services and renewal, decreases the administrative burden on fee recipients”.
On advice in superannuation, the legislation takes a once-off approach to advice provided with respect to MySuper, with the explanatory memorandum pointing to a prohibition on ongoing advice fees with respect to MySuper products but the ability to provide once-off advice and for the superannuation fund members to instruct that fees be deducted.
It said that non-ongoing fee arrangements were not defined in the Corporations Act but referred to any arrangement that relates to a particular service provided to the member on a one-off basis or over a period of up to 12 months.
“Fees for financial product advice related to a MySuper product are only able to be charged to a MySuper product in relation to a non-ongoing fee arrangement,” it said.
ASFA particularly welcomed the situation with respect to the provision of once-off advice and at the discretion of the fund member.
ASFA deputy chief executive, Glen Mcrea, said this was consistent with the principles underpinning the Royal Commission’s recommendation that the invisibility of advice fees be stamped out “but ensures where consumers wish to use their super savings to pay for advice on their own superannuation, they still can”.
“Sadly, many Australians cannot afford to pay for financial advice out-of-pocket. However appropriate financial advice is vital for consumers to superannuation fund members as they consider financial decisions throughout their working life and into retirement,” he said.
FPA chief executive, Dante De Gori, said the FPA had strongly advocated for a reduction in regulatory burdens on behalf of all financial planners across Australia in circumstances where there was a direct relationship between the rising cost of regulation, time constraints on financial planners, and the ability of Australians to access advice.
“This is a promising development and it’s great to see the Government has made significant changes to the annual renewal arrangements in response to concerns raised by the FPA in relation to the annual renewal notice and anniversary date operation. These changes demonstrate positive outcomes achieved for financial planners by the FPA so they can concentrate on assisting clients rather than managing administrative paperwork,” he said.