The Government has delivered the Financial Planning Association (FPA) a significant victory, using its response to the Financial System Inquiry (FSI) to foreshadow the legislative enshrinement of the term financial planner.
The Government’s FSI response has also substantially endorsed the imposition of higher educational standards for financial planners, based on degree qualifications and has signalled greater powers for the Australian Securities and Investments Commission (ASIC), including product intervention powers.
Where the Life Insurance Framework development is concerned, it is understood the industry will be given more time to transition to the new arrangements.
The FPA, unsurprisingly, welcomed the core elements of the FSI response with FPA general manager, policy and conduct, Dante De Gori, describing the outcome as positive.
Consistent with indications by former Assistant Treasurer, Josh Frydenberg, the Government will not be banning the ability to borrow within superannuation but, importantly it has signalled that it will be moving to develop an objective for superannuation and encourage the development of default post-retirement products.
At the same time as giving ASIC product intervention powers, the Government’s FSI response has signalled the introduction of legislation aimed at making the issuers and distributors of financial products accountable for their offerings.
“We will address the misalignment of incentives by reducing and improving the disclosure of conflicted remuneration in life insurance, stockbroking and mortgage broking. We will also introduce legislation to facilitate innovative disclosure,” the response said.
On the key question of financial advice, the Government’s FSI response said:
“The Government agrees to develop legislative amendments to raise the professional, ethical and educational standards of financial advisers by requiring advisers to hold a degree, pass an exam, undertake continuous professional development, subscribe to a code of ethics and undertake a professional year. The details of the new standards will be set by an independent, industry funded body, which will be recognised in legislation. The Government will consult on appropriate transitional arrangements for existing advisers.
“The recently established register of financial advisers will be amended to clearly identify whether individuals meet the new standards and whether there are relevant bans, disqualifications or code breaches applicable to that individual. We will also restrict use of the term ‘financial adviser’ and ‘financial planner’ to those listed on the register. A statutory review in 2019 will consider whether this new regulatory framework has raised the professional standards of financial advisers-and whether further changes are required.”
