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.
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.