Frydenberg continues his tick and flick approach to RC

3 February 2020

Despite the lobbying efforts of the major financial planning organisations, the Treasurer, Josh Frydenberg, has continued to apply a virtual rubber stamp to the recommendations of the Hayne Royal Commission – this time in exposure draft legislation covering superannuation advice fees renewals and insurance.

The degree to which the Treasurer appears to be measuring the Government’s legislation against the Royal Commission recommendations was reflected in his comments about being on track to implement them all by the end of this year.

However, the Financial Planning Association (FPA) has warned that in the absence of taking on board the warnings of the industry, the Government’s measures will simply further increase the time and the administration burden on financial planners helping their clients.

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FPA chief executive, Dante De Gori said the legislation would require business practice changes, administration changes and disclosure changes.

He said one specific proposed recommendation in the draft legislation that the FPA continued to challenge related to the requirement for financial advisers to renew client fee arrangements every 12 months, rather than the current two-year period.

“The FPA agrees financial advisers should be required to periodically review and renew ongoing fee arrangements, document them and seek the consent of their clients for any fees to be charged,” De Gori said.

“However, we believe requiring this to be conducted annually without any modification to the laws around when an ongoing fee arrangement can be renewed rather than reset, adds considerable time and cost pressures on financial planning practices.  It is not practical and will be too much of an administrative burden for many practices.”

While there was general consternation about the exposure draft legislation’s approach to annual fee renewals, a number of advisers expressed satisfaction that the draft appeared not to reflect the Royal Commission’s recommendation that life insurance commissions be reduced to zero.

Industry participants have until 28 February to respond to the exposure draft legislation.

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Tick and flick sums it up beautifully. What I don't understand is why they continue the carve out for Intra Fund advice. It can't be in a members interests to pay for some else. And it must be misleading to label it Admin fees. They say Hayne said it's an ok arrangement - I don't think he said that or if he did he's as bad a bureaucrat as the rest of them. Expecting lawyers and bureaucrat's and pollies to fix anything is a disaster. The free market is a joke. I might start labelling all my advice fees admin.

It’s a sad indictment that a person lacking in the experience of financial advice, dealing with everyday consumers can stand over this process and decide what stays and what goes thus affecting the lives of thousands of advisers and hundreds of thousands of consumers. Granted there are good and bad advisers but like most rules and regulations the majority suffer for the minority. There will always be advisers who do the wrong thing regardless of how many onerous rules you apply.

Can any one spot the ethical dilemma in the following article? Not to mention the irony.

Frydenberg is an interesting individual.
I believe he is intensely hungry for achievement and is focused on what strategy will best put him in a key position to have a tilt at the top job.
He just wants to keep his nose clean and quite frankly just doesn't give a damn about financial advisers or small business at any level whatsoever.
If there is collateral damage through his inaction it doesn't concern him.
It wont affect him, his family or his income and so why give it the oxygen it needs and risk political standing.
It is simply a case that he doesn't care and doesn't want to be accused by Labor of watering down his ridiculously blind commitment to Hayne's recommendation.
Even more ridiculous was Chris Bowen's statement even prior to Hayne's recommendations being made that Labor would implement all of his recommendations ( without even knowing what they were !!)
This all about politics, nothing more, nothing less.

Perhaps it's time for a review and overhaul of the judicial sector.
Why are the courts in Australia so slow in providing decisions compared to other Commonwealth courts.
I suggest we appoint a mechanic to review and make recommendations.

Just another laughable situation. How does this make any sense at all.....the new law says that advice fees can only be charged to a super members' account if the trustee has express written consent from the member i.e. the member has agreed and wants to use their super to pay for financial advice. But....if that member is in the default MySuper investment option then bad luck they don't have that option.

I don't think the Govt actually understands that a MySuper option is not a super fund in itself, just another investment option within a fund. Why limit people's ability to pay for advice because of the investment option they've chosen.

Essentially they are saying that we want everyone to be accessing intra fund advice not seeing a financial adviser, hence the allowance of fees for intra fund advice to continue to be called Admin Fees. It's madness.

When this was initially proposed by Hayne I know one industry fund that had already set up a structure where on receipt of the advice fee request they were going to transfer that amount of money into their cash option, this would then facilitate the payment of the fee because it's not coming out of the MySuper option. This is what we'll end up with.

Yes, this about the most ridiculous thing heard of.
How complicated do they want this to become?
It appears the inference is that if you are in a MySuper option then in order to access financial advice and pay for it, you will be disadvantaged compared to a member who is not in a MySuper option and can elect to have advice fees deducted from their account.
When MySuper was enforced upon people, I am convinced the Govt saw this an area that simply would never require any form of advice as the decisions regarding investment strategy would be made for you through a mindless "one size fits all" Lifestage option where no-one has to think.
This was about enforced Govt control and a dumbing down of the super space to deal with members who never took any notice of anything.
The problem is that they also sucked up a whole lot of people who were engaged and now won't have the option of paying for advice fees from their account , but will have to pay for them with after tax income (well that's a great win for the member)
What if a member has 30% of their account in a My Super option and 70% of their account split between other investment options which allows the payment of advice fees ??
Do you simply elect for the fees to be paid from the non-My Super options ?
This is simply becoming ridiculous.

I can see the point that mysuper can handle the investment decision and should do ok. It can be examined at a high level by regulators and they can put pressure on costs (to come down).
But what about some strategy work for mysuper clients? Aren't we supposed to consider strategy before product?
I feel many mysuper members could really benefit from some simple budgeting and retirement savings strategy combined with debt reduction and then the benefits of concessional super conts.
But clients can't pay for advice that isn't about the particular super fund with super money. You can't do projections for your client to pay down debt and then put those repayments into super tax effectively and show them how they will retire comfortably and have them pay for it tax effectively via super??? But they can take money from their super to pay for IVF???
Am I on the wrong planet here?

No, you are on the right planet, it's just the people running it still think the earth is know, like the flat dollar fee of $350 that you should charge for full, comprehensive financial advice.

interesting tweet......Given Bridget McKenzie failed to declare her membership of a club & she subsequently resigned, can you please advise when @JoshFrydenberg will be investigated for facilitating a grant to Grace Park Club - of which he is a member?

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