The Advisers Association (TAA) has criticised draft legislation, released by the Australian Treasury in January, which is intended to translate into law the recommendations made by the Royal Commission into banking, superannuation and financial services.
The draft said the law will come into force on 1 July 2020, but financial advisers have condemned “the government’s haste to introduce [it]”, because it leaves them with very little time to comply.
“We are very concerned that rushed legislation may result in poorer outcomes for everyday Australians,” said Neil Macdonald, chief executive of TAA.
“We think any legislation that necessitates such extensive change should be well thought through, have a reasonable consultation period and be introduced gradually.
“This would allow financial advisers to carefully adapt their systems and processes so that clients are not unintentionally disadvantaged.”
Hurting consumers
Macdonald added that many people may not be able to afford financial advice under the draft legislation as it stands, and that advisers should be given time to deal with such issues.
“Some of the draft legislation is flawed and the timeline is both unreasonable and impractical,” he said.
“If implemented, processes are likely to be duplicated and paperwork increased. This will make advice more expensive, which in turn will reduce access to advice.
“For those who can still afford financial advice, the client experience is likely to be worse, not better.”
TAA raised a series of other concerns as well, especially around working used in the draft rules.
For instance, the association contested the use of the term “intrafund advice”, as it “is not advice, but product information”.
TAA continued: “We broadly support the move to an annual fee, although we are concerned that this will make advice too expensive for many clients who are currently on biennial service arrangements, and also preclude everyday Australians from accessing advice solutions.
“Requiring advisers to notify each product provider every year that a fee is charged has negligible client benefits and serves only to create further client confusion, increase red tape, increase costs for trustees and for advisers, and therefore ultimately their clients.”
‘Fail to meet objectives’
Macdonald criticised the government’s move as he claims it does not protect clients or enhance financial advice.
“Changes to legislation must genuinely improve the advice being given to Australians, the efficient delivery of that advice and access to that advice.
“Some of this proposed legislation fails to meet those objectives.
“Financial advisers must be enabled, not unnecessarily hindered, so that they can continue to efficiently deliver sound, cost-effective, client-focused financial advice.”
