Now that the Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020 has passed in the Senate, it will become law from July 1.
The bill contains three important changes for the advice profession. One is the new requirement that it will only be possible to charge once-off advice fees from MySuper accounts from July 1 for new clients, and this requirement will also apply to existing MySuper clients from July 2022.
The second involves changes to Financial Services Guides for all financial advisers who do not comply with the definitions for "independent", "impartial" and "unbiased" as set out in Section 923A of the Corporations Act. From July 1, the FSG will need to include a statement explaining that the adviser is not independent in accordance with the above definitions and detailing why.
It is the third component of the bill that has caused the most concern in the industry, however: from July 1, advisers will need to annually renew their fee arrangements with ongoing clients. Every 12 months, an adviser will need to issue a fee disclosure statement and renewal statement including fees charged up to that point along with the projected costs over the next year. Advisers will have up to 60 days from the renewal period to issue these statements.
Commenting on the bill passing, the AFA said the annual renewal requirement will "add significantly to the administrative workload of financial advice practices."
In a separate statement, the AFA added: "The legislation is another Royal Commission-related bill that has been pushed through the Parliament with undue haste and lack of due process. We have repeatedly seen these bills submitted and passed without a Regulation Impact Statement or any form of Parliamentary Inquiry and inadequate debate of the substance of the bill."
It would appear there was at least one person in the Senate who shared AFA's views on this bill. Senator Slade Brockman, former chief of staff to Mathias Cormann, argued that while "we need to look very carefully at the Royal Commissioner's recommendations," the Royal Commission report is a "report to the government, not of the government."
He added: "Royal commissioners and royal commissions do not have a font of pure wisdom. They do not necessarily provide recommendations that always reflect the full breadth of knowledge and information that governments need to take into account.
"I fear that the suite of changes that has been made over the past decade has created an environment where the cost of advice will increase and some Australians will not be able to afford high-quality financial advice.”
The AFA described Brockman's comments as evidence of "increasing awareness of the impact of regulatory reform on the cost of financial advice," and the "first apparent public pushback on the overwhelming blind pursuit of the implementation of everything that Commissioner Hayne recommended."
With the bill soon to receive Royal Assent, though, we'd like to ask: what impact do you think this will have on your business?
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