Amid the furore over a document purporting to be an agreement between the Financial Planning Association and the Industry Super Network, Money Management's Mike Taylor publishes the contents of the document.
Much attention was last week focused on a document purporting to be an agreement between the Financial Planning Association (FPA) and the Industry Super Network (ISN) which had the potential to dramatically alter the tenor of the Government’s Future of Financial Advice (FOFA) bills and, ultimately, favour the professionalism agenda of the FPA.
The chief executive of the FPA, Mark Rantall, consistently denied the validity of the document or that the FPA had ever changed its position of strongly opposing the two-year ‘opt in’.
Perhaps, ironically, on the final day of the debate over the Future of Financial Advice bills, the Minister for Financial Services, Bill Shorten, announced the substantial delivery of the key elements of that document.
It was this outcome, despite Rantall's insistence in interviews with Money Management that the FPA’s position remained totally unaltered from that which it had outlined in a letter sent to the independents in the House of Representatives a week earlier, which gave rise to accusations of a side-deal sufficient to ensure the independents Tony Windsor and Rob Oakeshott supported Shorten's FOFA agenda.
By the closing hours of Thursday, those fighting for key amendments to the original FOFA legislation had conceded their case had been substantially lost on the basis of the changes announced by Shorten and originally outlined in the document.
In the interests of transparency, Money Management now publishes the text of the document acknowledging the FPA’s denials and asserting no view as to its origins or validity.
FPA and ISN joint position on FOFA
ISN and the FPA have agreed a joint approach to future regulation of a best interests test and ongoing charging by advisers, and disclosure of advice fees.
It is proposed to present their joint position to Government.
- (a) Joint FPA/ISN support for biennial “opt-in” for a period of at least 4 years from the commencement date and applying to New clients only.
- (b) The support for opt-in (a) is conditional on (c) & (d) being met.
- (c) That the Government agree to present and table legislation in Parliament by 1 July 2013 that will:
- (i) enshrine the term “financial planner” in law; and
- (ii) require financial planners to sign up to an approved code of professional practice which explicitly requires financial planners to provide ongoing financial planning services where an ongoing fee is paid; and
- (iii) the proposed law will adopt the recommendations of the Advisory Panel on Standards and Ethics made in November 2011 creating the obligation for all providers to subscribe to, and Licensees to participate in, an approved Code.
- (d) The government must actively facilitate the introduction of this legislation and ASIC must actively progress the operationalising of the legislation to market application and the professional community must develop appropriate standards solutions, within the 4 years of the opt-in period.
- (e) Licensees and professional communities that have advanced their application of these processes, and have put in place appropriate professional regulatory management practices to obviate the need for legislative opt-in requirements, as independently assessed by ASIC, will be able to receive class order relief from the provisions of the opt-in requirements
For clarification – The parties acknowledge that those providers who do not satisfy the requirements under (e) or who do not meet the requirements of future legislation developed in accordance with (c) continue to be subject to opt-in requirements under FoFA.
Best interests
- (a) The proposed note in the government’s amendments be amended to say “Nothing in s961B(2) is inconsistent with a provider limiting the subject matter of the advice where this is consistent with the client’s relevant circumstances. To be clear, the adviser can exclude from their inquiry any client circumstances which are not reasonably relevant to the identified subject matter.”
- (b) ISN will support the FPA’s proposed amendments to 961B(2)(g). [Note: this is subject to minor mutually agreed wording amendments, if any, to ensure the integrity of the intent of the amendments]
- (c) ISN proposes that the regulation making power be expressed more broadly to allow regulations to be made to clarify how scaled advice can be delivered consistent with the requirements of 961B(2) including defining expertise and relevant circumstances. [Note: this is subject to minor agreed wording amendments, if any, which ensure the integrity of the intent of the amendments].
Supplementary comments: We confirm that the intent is very clear that both the FPA and ISN agree to a joint position on Best Interest and agree that amendments will be made as intended in (a), (b) and (c) subject to final negotiations on wording to ensure the intent.
Annual disclosure
- (a) The annual disclosure for existing clients will apply to advices fees only and excludes disclosure of trail commissions.
- (b) Annual disclosure to New clients will exclude trail commissions on insurance products on the understanding that these commissions are fully and clearly disclosed in annual renewal notices provided by the insurer or super fund to clients.”
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