The Treasury is unlikely to budge on the opt in reform, although it is flexible on how it can be implemented, according to senior Treasury official Richard Sandlant.
Sandlant, the manager of the Treasury’s financial services taskforce, made the comment at the Financial Planning Association (FPA) National Conference, where he was up against some anger from certain delegates who called opt in a “terrible reform”. He said in its approach to the reform agenda, Treasury did not want to create unnecessary consequences or risks, or increase the cost of advice by inflating standards or through other measures being considered.
“We need to look at counterbalancing measures that can be taken to increase access to advice and improve affordability of advice,” he said, adding that it was important to create a positive future for financial advice because of increasing need.
However, he said, like the other big policy decisions opt in was not up for debate.
“As an industry it’s more about looking at how to implement this policy in a way that’s going to be as beneficial as possible and have the least unnecessary cost and consequences to the industry, rather than rehashing the debate,” he said.
Sandlant said draft legislation was expected by Easter or by mid 2011, when the industry would see more detail and then the finer points of the reforms would be discussed.
In terms of the implementation of opt in, Sandlant said Treasury would consider whether it would be a fixed annual opt in or whether there would be a grace period allowing for additional time after a one-year time period.
“One thing about opt in is that if there is a new piece of advice, opt in would come into play. But it’s not retrospective — there is grandfathering envisioned in terms of businesses that have a client book, including a significant proportion of clients that they don’t see frequently and therefore may have trouble making opt in work,” he said. “That’s one thing that we do have in mind in terms of the transition.”
Sandlant did not see that those who had regular contact with their clients would have problems with the opt in requirement, although he conceded that there were practicalities that needed to be considered.
“I guess that is why part of the option we are looking at in terms of opt in is flexibility — whether we can better manage the variety of client relationships, whether there’s some flexibility around timeframe, or whether the ability to opt in may be quick and painless, and administratively less costly. That is what we would want to achieve — especially for engaged clients.”
He said another issue Treasury was well aware of was the liability of the adviser should the client unintentionally fail to opt in.
Sandlant said the Minister for Financial Services and Superannuation, Bill Shorten, was likely to provide clarity on resolutions reached regarding a number of aspects of the reforms package by January, if not as soon as next month.
FPA general manager of policy and government relations, Dante De Gori, said opt in was causing “angst” for many members and its Future of Financial Advice taskforce continued to engage in discussions as to how opt in would work in a commission-free world. One of the key concerns, should clients fail to opt in, was where the adviser liability would stop and where consumer protection would end, he said.
