Last week, we discussed what the future of the adviser professional standards framework might look like - assuming the passage of the Government's proposed legislation.
Given the relatively scant information available about how a post-FASEA transition would be managed in the months following the surprise closure of the education body last year, the Financial Sector Reform (Hayne Royal Commission Response—A New Disciplinary System for Financial Advisers) Bill 2021 provided the advice industry with some much-needed clarity. Which isn't to say, of course, that it was entirely good news, either.
To find out what our community thought of the draft legislation, we sent out a survey last week. As expected, and highlighted in last week's article, there were concerns raised about the Government's lack of commitment to modifying the FASEA Code of Ethics to reflect some of the numerous complaints the industry has made about its general lack of clarity and the ways in which it intersects with existing professional obligations for advisers.
Lifestyle Solutions planner Daniel Boce, for example, described the FASEA Code as "unworkable," adding that the retention of the requirement that advisers with over 10 years' experience and clean compliance records must complete a postgraduate degree is "galling".
As part of the proposed Bill, the Government will also move towards the single disciplinary body recommended during the Royal Commission in the form of Financial Services Credit Panels convened by ASIC. These panels, the explanatory material noted, will provide ASIC with more granularity in the way it polices adviser misconduct - traditionally, as per the final RC report, its powers have been limited to banning orders.
The problem with this, according to respondent and LifeNet(WA) adviser Brendan Lynch, is that it reflects continued "overreach and compliance concerns about very minor issues, such as minimal errors with client service agreement fee calculations and other admin issues."
Overall, though, the biggest concern our survey respondents had was cost. This is understandable, given the additional business costs the industry has had to fork out due to a range of reforms - chief among them being the ASIC industry funding levy and the ongoing costs associated with the ever-evolving advice compliance regime.
Radford Allen Financial Services' Susan Allen, Watkins Financial Services' David Watkins and Rise Advice's Debbie Spence all cited potential costs as a concern - with the latter arguing the Bill constitutes "more requirements placed on us for no benefit to the clients and yet another layer of ridiculously expensive fees."
The cost question is particularly relevant at the moment given the recent spike in the ASIC levy, which ASIC deputy chair Karen Chester recently attributed to the "numerator and denominator" effect of the Royal Commission litigation pipeline and the declining number of advisers in the industry. What this Bill might potentially represent is a further increase in those levies, as the costs of administering adviser exams, monitoring adherence to the FASEA Code and convening disciplinary panels could be passed onto the industry.
Whether that happens remains to be seen, but there's still time for advisers to provide their feedback on the draft legislation. Not long, though - consultation closes on May 14, so if you'd like to make a submission, you can do so here.
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