It seems almost every day that a new regulation prescribing another form of disclosure is being piled onto the advice sector.
Causing considerable angst for the sector has been the issuing of new disclosure requirements from ASIC that took effect from 1 July.
The new instruments set out the information that should be disclosed to consumers in relation to advice fee consent and independence disclosure relating to ongoing and non-ongoing fee arrangements. Advice businesses and trustees must provide consumers information on fee, product and other issues when securing their consent to deduct fees. The regulations support the legislative implementation of annual renewal – a recommendation of the Royal Commission.
Different approaches to implementing the law, however, creates the risk of new uncertainty for the advice sector. For this reason, the FSC and the Financial Planning Association have been working together to generate a set of requirements that should support an industry standard form.
Our aim is to ensure that consensus on this area of regulation can reduce the cost of providing financial advice by lowering compliance complexity.
The FSC knows that the Fee Disclosure Statement and Opt In requirements, when combined with new advice fee consent documents and independence disclosure, will result in a large and complex table of numbers that will be difficult for consumers to comprehend. Availability of information is not a good indicator of whether that information is understood.
The solution to this complexity will not come from regulators, but through leadership by industry through bodies such as the FSC and FPA. The FSC hopes this is just the start to effective industry coordination.
Subject to legal review and implementation by FSC’s members we will look to codify this as standard industry guidance. The effectiveness of the guidance will depend on how broadly it is accepted by the industry, including by financial advisers themselves.
The FSC is strongly of the view, however, that a consistent approach is a better outcome than the prospect of a variety of different forms requiring different levels of scrutiny from the regulator – which will drive up cost.
This approach is consistent with the FSC’s broader industry leadership in our Green Paper on Financial Advice. The FSC is looking for practical solutions to reduce the regulatory burden on the advice industry that is shared by advisers and licensees.
Look out for our upcoming White Paper on Financial Advice, through which the FSC will set the path for meaningful reform to reduce the cost of providing advice for the industry and consumers.
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