FASEA contender for policy failure

The winding up of the Financial Adviser Standards and Ethics Authority (FASEA) represents a “stunning admission of failure” by the Government towards the financial advice sector.

Speaking in the House of Representatives on the Better Advice Bill, Labor’s Julian Hill, highlighted the failures in the implementation of the FASEA regime. FASEA was due to be wound up and responsibility would be transferred to the Australian Securities and Investments Commission (ASIC) at the end of 2021.

“FASEA is being wound up and will be taken over by ASIC and that is a stunning admission of failure, it was set up only three years ago and has had a litany of stuff-ups. It has had three chief executives in 18 months which is a clear sign it is not going well,” Hill said.

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“Standards were only released a few days before they were due to come into effect, causing adviser chaos.

“If there was an Olympics Games for implementation failure, this would certainly make the final.”

The only reason, he said, that it would not win a medal was because other failing measures such as the vaccine roll-out had cost people’s lives.

Hill added Government legislation over the years had led to advice being only available for the wealthy and called on politicians to find a way to close the advice gap which had opened up.

“Everyday Australians can’t afford financial advice, it has become something only for the wealthy but yet there has never been more need for it,” Hill said.

“More than 4,000 advisers have left the industry in the last three years and more are set to leave in the future so there is a smaller pool and higher demand. The Government needs to work out how to close this advice gap.”




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GOLG GOLD GOLD!!! Labor's Julian Hill wins the GOLD for stating the obvious. The funny thing (not) is that Labor was complicit in the establishment of FASEA and it's ongoing administration failure. Labor was fully aware of all the failings during FASEA's 3yr tenure, yet remained totally silent. "Hypocracy" comes to mind.

It's possibly fair, or just convenient, to see this as a political failure.
My view is that the failure of FASEA (which conceptually was not a terrible idea) is entirely due to the individuals who were given roles there who ultimately wrote the clumsy standards, the exam and managed the process inadequately..

Agreed Cal. The spirit and intent of the FASEA legislation was good. It's the implementation that was a disaster. I think you are being a little generous attributing FASEA's failures to simple clumsiness and inadequate management however. I think it had more to do with ideological bias and commercial conflicts of interest.

The disbanding of FASEA should be just the start of fixing this sorry mess. Next steps are correcting some of its worst mistakes (such as the wording of Standard 3), and launching a corruption investigation into those Board members who inappropriately profited (and continue to profit) from the conflicted decisions they made.

Yes, the rollout of FASEA has been a disaster. Yet Labor, who were the loudest in baying for blood like the pack of hyenas they are, have said nothing until now. They were complicit with the whole exercise and never opened their traps to suggest anything by way of improvement in design or implementation. Opportunistic parasites.

Wasn't it Labour who started the whole mess when the minister for the sector was Bill Shorten?

It was actually the Ripoll Report that started it. Its failure was due to no actual engagement with advisers and a lot of engagement with advocacy groups funded by ASIC.

Just another push for intra fund advice to be expanded not for financial advice to be fixed...

Intra fund advice is fee for no service.....

Lets keep reminding commissions for advisers worked the same way but were not in the clients best interest.... how can intra fund fees be viewed any different...

I call for external advisers to be able to provide intra fund advice the same as internal financial advisers.... and just charge for an hour with no soa etc

I think you have identified Labor's true agenda in all this. When he says politicians need to find a way to fill the advice gap, this is code for intra fund advice. Labor wants to legitimise and expand the conflicted advice via fees for no service rort (aka intra fund advice) used by union funds.

The cause of most problems in financial advice is bad regulation. The solution is not rorts like intra fund advice. It is not gimmicks like "fintech". The solution is fixing the bad regulation.

Why is intra fund advice fee for no service? The member pays a fee and if the member requires the advice they get it. The fund will provide the service. If they don't take up the service for the fee they paid that's the client's problem. If you charged a client $X for an annual review, as part of your ongoing services, and you contacted the client to arrange the review and the client declined for that year - would you refund the cost of the review?

yes, you have to refund it.

as far as ASIC is concerned, a decline to have a review is not an excuse not to refund the client an ongoing service fee. a review is only conducted and a fee subsequent allowed to be charged to the client, if an RoA or SoA has been produced.

every review must have an RoA or SoA produced, if it hasn't been produced, a review hasn't been done. fee for no service.

if the client declines, they are disengaged and the ongoing service fee (which isn't being provided, because it is only provided when it is documented by an RoA or an SoA) must be turned off.

thank you,

You may wish to do a little more investigation. The fee must be repaid when the ADVISER FAILS to deliver ongoing services (ASIC INFO 232). That is, 'the adviser may simply have failed to provide the annual review that the client has paid for' - it was their fault the review was not conducted. If they said they did conduct the review, they must be able to prove it by producing an SoA / RoA. Where a client declined the review is not the same as the adviser 'failing to deliver the review'. You will note that the compensation of fees by the banks etc was in relation to advisers charging fees but not providing the services when they should have.

Getwithit you couldn't be more incorrect

Services have nothing to do with it - only Advice is relevant in relation to Fee for no Service. Hours and hours of service may well have been provided - but if the records of an SOA/ROA are not produced, pay it back says ASIC. And to think, Shipton gave evidence at the RC that records only need to be kept for 8 years and that this applied to the FFNS program. Did someone tell a little white lie???

Shipton lying? Never!!!!

(Always thought the 'p' in his name was erroneous, likely originally spelt with a double 't' - Shit-ton!)

19-051MR ASIC provides update on further reviews into fees-for-no-service failures -
Is an offer of an annual review sufficient?
The institution should avoid a legalistic approach to whether its ongoing service agreements entitle customers to annual reviews. If the agreement requires an annual review, the mere offer of an annual review is not sufficient.

Treatment of customers who declined an annual review.
If a customer declined annual reviews in consecutive years, the licensee should refund some fees (as consecutive declines may indicate that the ongoing service arrangement is unsuitable for the customer).

we'll have to agree to disagree on this. but I suggest you do the same (see below).

my process is bulletproof. if I offer a client a review and they decline I switch off the ongoing fee immediately but at least no later than 30 days. if the client complained about you and they complained to AFCA, you'd have to pay them the fee plus interest.

so my process is better. doesn't matter what info 232 days. it matters what afca says. so if I were you, I'd follow my bulletproof process.

the question in my mind about your process is did you really receive informed consent to receive the ongoing fee? the answer is no you have not. would a disinterested or unbiased party agree with me or you? I'd take my chances with me.

please tell me how do you meet fasea standards 2, 3,4, 5(b), 7(a), 7(c),

All very interesting comments. We are all well aware of INFO 19-051. However, this INFO is a 'report card' on ASIC's investigations only. Many advisers (believe it or not), including AMP, have an ongoing fee agreement with a client that includes the service of, 'The OFFER of an annual review' (in addition to other services) - the agreement actually states 'An OFFER of an annual review' not, for example, the fee includes 'An Annual Review' .

19-051 states that charging for a service and that service is the 'MERE offer of a review' is not a service that can be charged for. You cannot charge a client for the privilege of being offered a review. The service that the client will pay for is having an actual review. You should also note in 19-051 that AMP will refund fees where where agreements 'STIPULATED the OFFER' of a review and customers declined three or more consecutive offers - not where the offer was for an actual review and the client declined the review. Where in any ASIC document does it say that the fees that have been charged for an annual review must be refunded to a client if the client decides they don't want an annual review that year.

Its called 'commercial reality' - if you pay for say, a concert ticket, and decide not to go to the concert do you expect the promoter to refund you? If the promoter cancels the concert you are entitled to a refund. Why is it different for an annual review that the adviser is prepared to provide and the client does not want the review. The fee must be refunded where it was the advisers fault that the review did not take place.

I must clarify my view further, if an adviser contacts a client to arrange a review on a particular date and the client cannot attend on that date, this does not constitute a client declining the review - the adviser and client should find a date that is suitable for both.

And for the record I would refund the fee if a client 'declined' the review and would consider if the client actually required the services I offer. If not, my offer would be - if you need any further advice contact me I will charge an hourly rate.

once you get audited by asic and asked to refund the client the ongoing fee and interest on top you will see what the rest of us are going on about.

anyways good luck to you

This is ASIC's few on fee for no service:
'While a fee for no service is the failure to deliver ongoing advice services to financial advice clients who were charged fees for those services, this information sheet focuses specifically on failures to deliver an annual (or other periodic) advice review that was promised to a client. There are many reasons why these failures might arise. For example, the adviser might have retired or resigned and the AFS licensee did not appoint a new adviser to service the client. In other cases, the adviser may simply have failed to provide the annual review that the client has paid for'.

Very clear: if the adviser, 'failed to provide the service' refund the fees. Nothing about If client did not want a review the fees have to be refunded. The adviser was willing to provide the service - no failure on their part.

Johno, the horse has bolted on that one mate - sorry.

So direct me to where ASIC states the fee must be refunded if a 'client declined' an annual review - not the situation where the adviser 'should have provided the review but didn't'. You should be able to support your statements (just like being able to support a product recommendation).

Getwithit - face some facts, Intra Fund fees are the best thing that has ever happened - to those receiving it.
Hundreds or thousands of members I believe are paying.
Lets look at it from the point of view of the people receiving all this money - rivers and rivers of gold - snout in the trough so to speak with $$$$$$ just pouring in - deep in the dough - comfortable and secure in salary, bonus and longevity - earning it large etc.
- Members don't actually need to be provided with anything - tick. Hold my drink while I just pour myself another one thanks.
- Get clients to opt-in annually, bi-annually, every ten years - no. Brilliant - tick.
- Ability to provide advise to maintain and increase FUM for the trustee - yes. That's a big tick. Also gets the staff a bonus perhaps.
- If the member never calls - who cares? Pay the fees back? - No, don't be silly. That's another big tick.

Basically, if Intra Fund Advise was worth anything - then ask the member to pay WHEN THEY USE THE SERVICE/RECIEVE THE ADVICE.

You are forgetting the fact that superannuation is a competitive market place, all funds are trying to attract new members by being cheaper, better performing and providing better outcomes and services. There is no incentive for the fund to waste money on advisers if they aren't doing anything. You seem to think the advisers can just sit there and charge the fund whatever they want without doing any work? that's not how it works. It's like any other business, a fund provides a range of services and they are always balancing the cost with the benefit it provides. As many people have pointed out, intrafund advice is often very basic and many proper advisers would consider it shit, but that is because they are trying to provide it at the lowest cost possible.

Sounds like commissions Anon - sweet $$$$$$$$$$$$$$$$$$$$$$$$$$ forever. I'm sure you work hard - just as you. Mean while, members are being charge for your service you have never met and never will meet. That money would be better in the members account rather than your pocket - Intra Fund Fees are reducing the retirement outcomes of members to deliver conflicted advice.

Funny - re your last point I take it you are also suggesting Financial Planners do the same 'Basically, if Financial Planning services was worth anything - then ask the client to pay WHEN THEY USE THE SERVICE/RECEIVE THE ADVICE'.

Getwithit - all ready the case. Where seems very outdated?

You must be the only financial planner that only charges a client a fee when they require a advice - no ongoing fee arrangements or annual fee agreement, that include paying, say a monthly fee. Good on you. -the way it should be.

This is such a clear election ploy. Hoping mud will stick on the LNP, omitting the fact Labor were the ones busily mixing the water, dirt, rocks & sh*t in the first place.

Such transparent BS but all the main media will lick up this whoring with glee.

Wait. The goal of FASEA and ASIC is to remove access to indepenent advice and get rid of us pesky advisers who steer clients away from the poorly performing Industry Funds and act in the best interests of clients. Whilst extracting as much money from our sector to pay the bonuses of high ranking public officials before they quit public "service" and go sit on the boards of directors as the Banks and Industyr super funds.

Is it not?

Spot on.

I can't believe this. it's not 4,000 it's 9,000. long term average number of registered advisers has been 28,000, it is now 19,000. there is probably another 5,000 left to go by the end of this year and a decline of 5,000 per annum happening at 100 per week

the vast majority of those leaving have been accountants with a limited license, 6,000 were issued 300 remain with the last of the 300 being handed back, 1 in 5 fasea passed advisers are leaving many of them already hold a fasea approved degree

104 AFSL's have ceased operating in the last 12 months, many more will finish by the end of this year. it will become impossible for AFSL's with less than 500 to operate so many will fold

the cost of compliance has gone up and will continue to go up, for example, next year there will be another increase to the adviser levy. as many accountants and others such as mortgage brokers who were operating a financial planning practice as an adjunct to their main business leave increasing cost even more

the cost increase is not solely because of fasea. the cost is because of fasea and overall compliance burdens increasing, and dealer groups coming on top of the law to meet AFCA requirements which are even more.

you cannot reduce the cost of advice by disbanding fasea, you also have to address the dealer group structure, and also AFCA

if you don't do that the dealer groups will still work towards AFCA standards whether you like it or not and we will then need to go through the 60 steps ((c)thanks Julie Matheson, CFP(r)) before ANY piece of advice is provided.

cost isn't going down, anytime soon, the cost is going to explode talk to any adviser, 100% of them will have taken on fewer clients and increased their fees.

ASIC read over 400 submissions on the cost of advice review, 240 were from practicing advisers their feedback:

a. we'll let the government know
b. we can't believe dealer groups won't use the shortcut RoA, it's fasea compliant we promise, they are
c. we'll tweak our RG's

good luck!

Totally Agree. Advisers these days must (and I stress....MUST) deliver their advice in a manner that not only abides by the law and countless additional regulations, but most importantly is litigation proof. Many advisers have a justifiable pathological fear of ASIC and AFCA and so advice is now by "protective necessity" lengthy, arduous and thus costly so as to protect advisers from vexatious litigious lawyers. The concept of affordable advice sounds lovely in theory but in practice does not come down to a mere 1 or 2 page advice piece like a lawyer giving advice. Unfortunately regulations allow legal and tax advice to be delivered affordably, but financial advice, not so. In the meantime, in order to operate a commercially viable advice business in full compliance with onerous regulations, I serve only the wealthy and the willing to pay.

*****Bernie Ripoll Report _ (review into Storm and other failed companies cleared ASIC of all wrong doing)chaired by Labor MP Bernie Ripoll - ******

Comments from AFA "the AFA has some concerns that, if done poorly, it has the potential to become a witch-hunt of financial advisers."

****FoFA is legislation that was originally introduced by the federal Labor government in July 2012*****

After winning the election, the federal Liberal government proposed temporary reforms to amend FoFA (the Corporations Amendment Bill 2014), to be applied from 1 July 2014. It removed some of the consumer protection initially promised, including:
1. Diluting the best interest duty by removing the catch-all requirement to take “any other step that…would be regarded as being in the best interests of the client”
2. Excluding general advice from the remuneration ban (where general advice means advice given without being based on the client?s overall situation)
3. Removing the requirement for clients to consent to ongoing advice, and only requiring fee disclosure statements for clients first engaged after 1 July 2013.

***The 2018 LIF reforms – triggered by the Trowbridge Report, an ASIC report (413) (target known churners )***
Mr Chalmers said Labor's "priority" is consumer protection and pointed out that the bill could "do better in this regard".
"One concern is with the clawback provisions in the final package. The clawback provisions are limited to the first two years of a life insurance policy," he said.

"We would not want to see financial advisers pressure customers to unnecessarily change their life insurance policy after two years, as a result of these changes."

Meanwhile, Liberal backbencher and federal member for the Queensland electorate of Forde, Bert van Manen, told Parliament he cannot support the bill in its present form due to the "significant damage" it will inflict on independent financial advisers.

*****October 15, 2020 Stephen Jones, has signalled that Labor’s preference is to abolish insurance advice commissions if elected to federal parliament in 2022 due to a fundamental belief that the service can’t be provided without the influence of conflicts.*****

Do not vote for Labor.....

Thank you WOW for this clarity, hopefully idiots like Jo' Son, Ben Dover & the morons at AIOFP will read this and reconsider their insane shrieks to vote Labor.

Though that's the nature of morons isn't it? They have an adept ability read factual information and then completely ignore it if it doesn't align to their own 'truths' that they want to believe, aka Trump style.

I think at this point it is to fight back with facts... Labor aren't stupid and libs know they can only make adjustments so far or reject them. for got to point out in FOFA is when they introduced intra fund advice along with a crave out.... at the same time going after commissions which was a industry wide practice acceptable to provide service exactly how intra fund advice work. but they can't continue down this line as it don't make sense. you cannot ban one and let the other continue and doesn't make sense that only internal advisers can give the advice when these staff have a conflict of interest.

The call to investigate how to make advice more affordable you might have seen are a sad joke as well they did this back in 2010 Report 224 was introduction before FOFA and all driven by labor and don't for get all the industry fund ads regarding commissions before the GFC....

https://download.asic.gov.au/media/1343546/rep224.pdf

You are living in the past. Look at what the coalition have done recently. Financial advisers are big influencers and they will turn savagely on the coalition at the next election. Instead of wasting your time with a diatribe on here, speak to some coalition pollies and try to talk some sense into their thick skills. In one term of government they have turned their biggest ally into their biggest enemy.

Yes, if your back was against the wall and guns levelled at you by a highly vocal opposition/supposed public-opinion (via media hype), would you sacrifice yourself for a bickering, small, ineffectual, self-interested, conflicted, publicly lambasted, (and already found guilty by the media-jury & misguided Royal Commissioner) unprofessional cottage industry group, like unfortunately ours is, or would you simply enact the recommendations and attempt to move on?

Until we get our own professional bodies unified & agreeing & singing from the same hymn sheet, (and shut up all the holier-than-thou inner-idiots finger pointing at anyone daring to do things differently than they do) and effectively managing our own professional PR and public image, we're at the mercy of an aggressive Labor who receives 'rivers of gold' via their unions with fingers in the pot of industry super capital.

Relying on any political party to do anything for us is as effectual as p*ssing in the wind.

As did the medical & legal professions hundreds of years ago, unfortunately we need this cathartic culling and insane mandatory imposition to cull the group hopefully into a reasonably singular professional body. Unfortunately for us, those professions never had a wealthy politically ingrained mortal enemy who would receive billion$ in benefits on our demise, as we face with industry super.

The best we can hope for is to individually (business & professional person) adapt to the changes and possibly reap greater rewards as colleague numbers drop, demand grows for services and hence our quality of client and fees will grow. We've seen this already, and while some will say this is callous or cavalier, it is in reality simply commercial. We are in the business of being in business after all. Anyone who says otherwise is delusional and should be picking up an employment income from a not for profit group.

I'm not so sure about your claim that it's impossible for AFSLs with less than 500 to operate. Perhaps it will be impossible for smaller dealer groups to operate, but small AFSLs with no inhouse product and directly employed advisers are perfectly viable. The reason small dealer groups struggle is that the dealer group itself requires enormous amounts of additional complexity and cost, that advisers have to pay for. Take the dealer group out of the equation and everything becomes much simpler and cheaper.

Intra fund / general advice is the way going forward! Just spoke to someone who was "advised" to do a withdrawal and re contribution strategy. No soa. No fees. Amazing.

Are you saying that this strategy was advised to a client via intra-fund general advice?

Unfortunately it's pretty common to get this advice from a big super fund here in WA.

Findings into ASIC corruption secretly deleted....

https://www.theklaxon.com.au/home/asic-findings-secretly-deleted-rpnlp

Labour was responsible for the Ripoll Report.... which lead to the RC 10 years later. An abject failure of policy by those involved including all political parties and gov deps. Bumbling, inept fools promoted well beyond their competence.

It has taken a long time for planners to recognise that the demise of the financial service intermediary was commenced by LABOR with the Ripoll Report.

Instead of identifying and fixing the problem of eradicating mass sales of get rich schemes using negative gearing without subjecting it to stress testing the cash flow situation to confirm the ability to pay back both the interest and capital led to financial disaster for those investors.

The actual process should have been outed and the promoters been made to suffer the full consequences permitted under law.

Subsequently, the ISA, IFM have had LABOR under Shorten, Bowen et al introduced the COOPER - My Super regime and at the same time carved a protected intrafund advice platform whilst enshrining the need for costly, inefficient, exorbitantly priced, HOLISITIC ADVICE.

Further, ISA and IFM use illiquid assets, refuse to disclose the details of these assets and their continuous valuation process. How much is the deferred CAPITAL GAINS tax liability? Or do they believe that the TRUST structure under which they operate is perpetual in nature and that will never have to sell the asset and as such and not trigger a CGT event and thus not pay the tax.

A PONZI style bubble that could burst at anytime.

Allegedly, with respect to advice, the intermediary must provide just ADVICE not attached to FINANCIAL PRODUCT.

But all intermediaries know that is the application of suitable well considered FINANCIAL PRODUCT solutions is what delivers OUTCOMES.

The role of the intermediary and the investor is a two way commitment if one is to ensure the desired planned for result.

It is the intermediary RENUMERATION that is the bugbear.

Investment Manager and Investment Platform Consolidators charge on a %age basis.

The financial products available to an intermediary are priced with retail investment fees whereas the investment platform consolidator only pays WHOLESALE investment management fees.

The difference between the WHOLESALE and RETAIL investment management fees is horrendous and that is where the investment consolidator platforms make their money. A lot of financial FAT there.

Meanwhile, the intermediary now classed as the FINANCIAL PLANNER must renew the ongoing two way commitment between investor and planner on a continuous basis and thus charge exorbitantly to conduct upto date individualised review of HOLISITIC planning rather than just maintaining and tweaking the financial product to suit the current economic conditions.

If it is OK for investment managers and platform consolidators to charge on a %age basis, why is it not OK for the intermediary?

Well said.

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