The FSC has made no secret of the need to reduce the regulatory burden on the financial services industry, particularly financial advice, in its advocacy to Government and regulators.
When we release our White Paper on Financial Advice shortly, we will offer a comprehensive plan for reducing the cost of providing financial advice. The White Paper also recommends the sequencing of the proposed reforms ahead of the Government’s own review of advice and the Australian Law Reform Commission’s proposals to ‘tidy up’ the Corporations Act in 2023.
Until then, it is up to industry to manage the compliance burden it has today and the complex new requirements taking effect from July to October. Annual renewal of fee consent is now a reality. The Design and Distribution Obligations (DDO) and strengthened breach reporting requirements are part of a swathe of new regulation affecting the sector, not to mention the impact on advice from major changes to superannuation and life insurance. The FSC has taken the initiative in two areas already and, where possible, we will do more.
Our first significant initiative is DDO. FSC members have worked together to develop template Target Market Determinations (TMDs) that are now being used across the industry, with more than 280 non-members using the templates. The standardisation the template enables should make life easier for advisers as they will have significant familiarity with TMDs based on the templates, the adviser DDO requirements will be similar (or identical), and data solutions will work across the numerous businesses who use the template. We have also developed template guidance for advisers on what ‘significant dealing’ means for managed funds and life products, helping fill a major gap in the existing DDO guidance. And we are developing guidance for product issuers that are asking due diligence questions of advisers and licensees – this will encourage common questions to be used across the industry, again reducing costs on advice businesses that would otherwise face numerous different questions from product issuers.
The second initiative has been the development of a set of steps that advice businesses, trustees and product providers can take to meet advice fee consent and independence disclosure obligations. We are planning for these steps to be ready for use by the end of this year.
The material developed by the FSC to date leverages the technical insight and expertise of our members at the frontline of the financial services industry. There could well be more opportunities ahead for members to develop standards and guidance for use to reduce compliance costs and aid industry wide standardisation.
Working closely on issues like standard forms and requirements to get consistent and coherent forms of compliance across the industry can deliver the quality, trust and efficiency consumers expect. While such objectives are sound, this collaboration can also support the long-term credibility of the industry to regulate itself.
Zach Castles is Policy Manager for Advice and Michael Potter is Policy Director for Economics &Tax
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