Most financial planners will soon be regulated by two bodies and this represents a real problem for the industry, according to the Financial Planning Association (FPA) general manager for policy and standards, Dante De Gori.
De Gori and FPA chief executive Mark Rantall told a media briefing yesterday that the financial planning industry was so consumed with the Future of Financial Advice (FOFA) reforms during the last two years that the issues surrounding the Tax Agents Services Act (TASA) flew under the radar.
TASA will capture all advice in relation to tax matters – such as salary sacrifice and retirement planning – which remains a crucial part of planner services.
The inclusion of financial planners under TASA means they will soon be subject to a set of separate competency training and registration requirements created by the Tax Practitioners Board (TPB), in addition to the rules already imposed by the Australian Securities and Investments Commission (ASIC).
"This dual regulation is a real problem because having one regulator is quite substantial," De Gori said. "Having two, with the second not knowing anything about financial advice, is a problem."
De Gori said there was little to no guidance for financial planners in the TASA Act. There will be a three-year transition for existing advisers, but anyone entering the industry after 1 July will be at risk of having a civil penalty imposed by the TPB, unless they comply with the new rules.
He added there were other practitioners in the industry who are subject to two sets of regulation, but unlike financial planners, they have made that decision.
"If you're an accountant providing financial planning services you're regulated by two regulators – but they've chosen to be financial planners and therefore have chosen to be subject to two separate sets of regulations," De Gori said.
"What we're talking about here are financial planners who just want to be financial planners; they're not choosing to be tax agents, they're not choosing to do tax returns, they're not choosing to be tax accountants. But they will be subject to a separate regulator regime – it's a significant difference."
Furthermore, the category pertaining to financial advisers is purely linked to products, he said.
"The problem is, if you're an adviser who may provide strategic advice without product recommendation, you can't rely on the category and have to be a fully registered tax agent."
There are also potential issues around professional indemnity insurance and the client complaint processes. Details around competency requirements for financial planners are due to be released this week, Rantall said, and the legislation might not be tabled in Parliament until the last sitting in June.
A complete exemption is not on the cards, De Gori said, but the FPA has called for ASIC to step up.
"ASIC has put their hand up saying we don't have the expertise or the resources. But to be quite blunt, ASIC have already had their obligation because they're responsible for the financial advice provider including advice relating to tax matters," he said.
"You can't just separate it."
