Why 2022 is the year everything changes

In December, we laid out some of the most pressing questions advisers would need answers to in 2022.

Among those were how and when ASIC would run adviser exams post-FASEA (the regulator has since announced the February round will take place on the 17th, 18th, 19th and 21st), what the potential effects of the single disciplinary body would be and where the Government stands on the heated debate over the CSLR levy. There were also broader questions concerning advice affordability and a potential overhaul of the legislative framework in which advisers operate. 

As February approaches, we know a little more than we did back then – but not much. In fact, there’s now even less certainty regarding at least one item on the agenda: FASEA’s final consultation on proposed amendments to Standard 3, which the education body passed onto Treasury to handle before closing down. 

One thing we do know: there’s so much hanging in the balance this year for the advice industry and very little time to get answers. 

What’s still on the table? 

Obviously, the biggest event on the Australian political calendar this year is the upcoming election, which we’ll discuss in more detail shortly. But it’s also worth noting that there are multiple pieces of legislation whose survival hinges on being passed prior to the election being called.

These include the Financial Accountability Regime (FAR), which is the broader-scope replacement for the Banking Executive Accountability Regime, and new rules regarding electronic signing of required documentation under the Corporations Act. More relevant to the advice industry, though, is the CSLR levy framework, which is folded into the aforementioned FAR Bill. 

As discussed last year, the CSLR funding model has been designed to mirror the existing one used by ASIC and, as a result, advisers will be on the hook for the biggest chunk of costs. Collectively, they will be billed an estimated $12.3 million in the first year and $7.5 million for the next two years. This breaks down to a levy of $544 per adviser in year one and $341 per adviser in years two and three. 

This proposal has been highly contentious among advice industry representatives – both because of the potential financial impact and because certain products and services, such as managed investment schemes, have been excluded from the scope of the CSLR. 

Given the imminent election, however, it’s unknown what will become of the CSLR funding model in its current form. 

New management

The result of the election could have even broader ramifications for advice, though. Bearing in mind the general rule that any promises made during an election campaign should be taken with a grain of salt, it’s worth remembering that, just over a month ago, Labor MP and Shadow Minister for Financial Services and Superannuation Stephen Jones was particularly vociferous about his party’s vision for an “egregiously injured” advice industry.

This vision primarily involved repealing some of the more onerous FASEA requirements. Unlike the LNP, Jones said, Labor would “[recognise] the value financial planners have in our system” and will, if elected next year, “properly recognise [advisers’] experience” by no longer requiring advisers to undertake a bachelor’s degree if they have 10 or more years’ experience and a “good record” under their belt. 

The Morrison Government, meanwhile, is currently undertaking the Quality of Advice Review, which aims to address issues including advice affordability and the impact of the Life Insurance Framework. It’s unlikely that the review will consider the potential impacts of the CSLR on affordability, though, considering that Minister for Superannuation, Financial Services and the Digital Economy Jane Hume recently dismissed talks of expanding the scope of the scheme. 

At the time, she said that including managed funds in the scheme would have a negative impact on “everyone who makes sensible, cautious, informed investment decisions.” This is because such people would see their “returns clipped to underwrite people who punt their savings on emu farms or tulips or other too-good-to-be-true high-return, high-risk investments.”

There may be further advice policy proposals that emerge as the election draws closer, and we’ll keep you updated on them as they appear. 

Change needed 

At the beginning of 2021, we asked what needed to happen in order to stop the precipitous decline in the number of financial advisers in Australia. Back then, there were around 21,000 advisers on ASIC’s register – that number is now set to dip below 18,000. 

FASEA has been regularly cited as a primary contributor to this decline, but are there other underlying issues that must be addressed in 2022? The terms of reference for the Quality of Advice review highlight matters including how advice is categorised (personal versus general, for example), disclosure requirements, life insurance commissions and ASIC’s enforcement conduct.

The Australian Law Reform Commission’s review of the legislative framework around financial services also points to deeper issues embedded into the Corporations Act – which the ALRC described as “the most complex on the Commonwealth statute book,” replete with “a lengthy [mazes] of provisions.” Perhaps part of the answer to the advice industry’s problems involves a complete, bottom-up rework of how advice is regulated and defined in law, rather than piecemeal amendments to existing legislation. 

Either way, it’s clear that these problems need urgent solutions. 2022 may represent another challenging year for advisers – but it’s also an opportunity to get your voice heard. 


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The opinions, advice, or views expressed in this content are those of the author or the presenter alone and do not represent the opinions, advice or views of No More Practice Education Pty Ltd. Our contents are prepared by our own staff and third parties who are responsible for their own contents. Any advice in this content is general advice only without reference to your financial objectives, situation or needs. You should consider any general advice considering these matters and relevant product disclosure statements. You should also obtain your own independent advice before making financial decisions. Please also refer to our FSG available here: http://www.nmpeducation.com.au/financial-services-guide/.

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