The Tax Practitioners Board (TPB) has been told that financial advisers already provide extensive initial and ongoing disclosures to clients and that seeking to impose the need for Letters of Engagement is going too far.
In a submission directly addressing the TPB proposal, the Association of Financial Advisers (AFA) said financial advice disclosure and client consent requirements “are extensive and the addition of further obligations is likely to deliver limited additional benefit, whilst also driving up the costs of providing financial advice”.
“In our view, the requirement for tax (financial) advisers to provide an extensive engagement letter, including doing so on an annual basis for ongoing clients, is excessive and unnecessary. We do not believe that this will serve any beneficial purpose for clients who will be inconvenienced as a result,” the AFA submission said.
In doing so the AFA repeated the assertions contained in an earlier submission to the TPB noting that the proposal was being put forward “at the same time as a large number of advisers are reconsidering their intention to remain in the financial advice profession”.
It said the key drivers of an expected exodus of financial advisers were the new education standards and the likely impacts from the Banking Royal Commission.
“The Royal Commission has recommended that clients be required to provide specific authority for the continuation of fees on an annual basis (Recommendation 2.1). The new FASEA Code of Ethics also refers to additional requirements to obtain client consent for services being provided and ongoing remuneration,” the submission said.
“The net impact of all these changes is to substantially increase the cost of providing financial advice, which will have a much greater impact upon average Australians seeking financial advice, where it may no longer be accessible or affordable.”
“This proposal from the TPB, along with the Transfer of Business proposal, is likely to have a further negative impact upon the viability of the financial advice sector.”
“On the grounds of the existing disclosures already provided, and the anticipated further changes to flow from the Royal Commission with respect to client renewal arrangements, we recommend that this TPB engagement letter proposal does not apply to financial advisers, and certainly not for the next two years whilst other regulatory issues are finalised,” the AFA submission said.