Perhaps the most transformative piece of change recommended in the FPA’s policy document is the removal of the current AFSL system for advisers, to be replaced with individual registration. 

Following on from the government’s commitment to establish a single disciplinary body for advisers, as recommended in the royal commission final report, the association has suggested this body also be responsible for setting professional standards, investigating standards breaches and maintaining a register of advisers. The TPB, ASIC and FASEA’s existing regulatory standards would be rolled into one set of standards maintained and monitored by this body.

The body would also be responsible for collecting a single schedule of fees from advisers that would encapsulate all relevant costs of regulating the sector. 

The current AFSL system would be maintained to regulate the operation of financial products only, to ensure adequate separation of product and advice.

Individual responsibility

While the adviser disciplinary body would be responsible for verifying information on the adviser register such as an individual’s qualifications, maintaining accurate information on the register would be the responsibility of the individual adviser, not their employer.

The FPA has recommended the term “general advice” be done away with as it is too confusing for consumers. The association has suggested the terms “product information” or “strategy information” be used in situations where general advice was previously given.

The FPA has also called for the general advice warning to be amended to specifically point out to consumers that they should seek advice from a financial planner if they want their personal circumstances taken into account, and has suggested the government conduct a review of how general advice is being provided following the change of terms.

Strengthening consumer protection

The FPA said the existing sophisticated investor definition needs to change, with the current income and assets tests to be moved up to a more appropriate dollar amount to today’s standards and indexation built in to allow the amounts to move up over time. The association has also suggested a “financial capability measure” be put in place to assess the competence of sophisticated investors.

The FPA suggests ASIC also conduct a review of the ways restricted terms such as “financial planner” and “financial adviser” are being used, as well as related terms such as “financial guru” and “financial mentor”.

Improving the PI market

The association has pointed to the fact that the operation of the PI insurance market for financial planners needs to be improved, and has suggested the way to do this is by implementing the recommendations from Richard St John’s 2012 report into compensation arrangements for consumers of financial services.

Access to consumer data

The FPA has made a number of recommendations to improve the access that advisers have to their customers’ financial information, including requesting that the ATO and Centrelink open up access for financial planners to their clients’ online profiles.

In addition, the forthcoming consumer data right initiative should be extended to super products and allow financial planners to become accredited to access client data if the client gives them permission. 

Doing business electronically

The FPA said the government also needs to do more to encourage — and where necessary, require — participating institutions in the financial services industry to provide electronic options for disclosure and transaction documents.

Making scaled advice more practical

The FPA has called for ASIC to provide detailed guidance on what constitutes a compliant SOA for scaled advice, in order to give more confidence to licensees that this type of advice can be provided without inadvertently breaching the law. The current “small investment advice” provision should also be extended to investments up to $50,000 and include super, in the association’s opinion.

Tax-deductible advice

The FPA has proposed the government extend tax deductions to cover all forms of financial advice rather than just that which directly relates to the creation of investment income. It has suggested the government cap the amounts that can be deducted or introduce income means tests to keep deductible amounts at a sustainable level.

Evening the playing field on deduction of advice fees

The FPA has suggested a single set of rules be created around the deduction of advice fees from super, which “apply equally to all superannuation funds, accounts and investment choices” and create an even playing field in terms of disclosure, renewal and authorisation.

Retaining LIF commissions

The association has said commission levels should remain where they are under the current LIF requirements in order to continue to give consumers choice around paying for insurance advice through commissions or flat fees. Insurers should also be encouraged to create new fee collection options and commission-free products for advice clients.