Michael Nowak

The Association of Financial Advisers (AFA)’s advocacy on behalf of its members has helped win a major concession from the Government, with the proposed trebling of the ASIC Funding Levy (the ASIC Levy) on hold, AFA National President Michael Nowak announced today.

“The proposed increase would have seen the ASIC Funding Levy per financial adviser increase by 200% in just over two years, from $1,142 in 2018/19 to an estimated $3,450 in 2020/21,” he said.

Mr Nowak said that in response to extreme concerns raised by the AFA and the advice sector about the impact of the increases, the Government has decided to reduce the ASIC Levy back to the 2018/19 level of $1,142 per adviser for the next two years, in the face of further Hayne Royal Commission recommendations being implemented.

During this time the Government has announced it will also be undertaking a review of the ASIC industry funding model to ensure that it remains fit-for-purpose.

“This is a much-needed move in the right direction, and I want to thank the Treasurer The Hon. Josh Frydenberg, MP and the Minister for Superannuation, Financial Services and the Digital Economy the Hon. Jane Hume and the Government for finally listening to the AFA and the advice sector,” Mr Nowak said.

“The financial advisers the AFA represents are dealing with a requirement to sit a compulsory FASEA Exam and meet other education standards to keep their livelihood, on top of an overwhelming volume of other regulatory reform, huge sectoral restructuring and the impact of the COVID-19 crisis.

“It was unjustifiable to expect advisers already dealing with this tsunami of reforms to have to find extra cash to fund a trebling of the levy over two years to support an industry funding model requiring small businesses to pick up the cost of litigation against large institutions.

“This is a significant first step in starting to address the practical impact of the reforms on the ability of financial advisers to offer everyday Australians sound financial advice to give them financial security and independence.

“There is much more to be done to ensure that post the reforms financial advice can still be delivered in an efficient and cost-effective manner, thereby ensuring that it is available to the majority of Australians.

“The ASIC Funding Levy has been the subject of intense discussion at Parliamentary hearings throughout the course of 2021, and we thank all those politicians who have picked up this cause and lobbied on behalf of the financial advice profession.”

At the Parliamentary Joint Committee on Corporations and Financial Services hearing with ASIC on Friday 27 August 2021, the ASIC Funding Levy was the subject of discussion for the first 50 minutes, with probing questions from a number of the committee members.  The AFA thanks Andrew Wallace (LNP Qld), Bert van Manen (LNP Qld), Senator Deborah O’Neill (ALP NSW) and Steve Georganas (ALP SA) for their passionate pursuit of this matter.

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They are Professor Deborah Ralston, a former Chair of the Association who stepped down in September 2019 on being appointed by Treasurer Josh Frydenberg to the three-member Retirement Income Review panel, and Bryan Ashenden, Head of Financial Literacy & Advocacy at BT, Westpac’s wealth management arm.

SMSF Association Chair Andrew Hamilton says: “We are delighted to be able to announce these two appointments. Deborah proved an invaluable Board member during her last stint, playing an important role in the public debate on a broad range of retirement incomes policy issues.

“Her many years of being involved in key public policy debates in the financial services industry, with a focus on innovation and retirement issues, is a resource that the Association will be able to tap again, and we look forward to hearing her wise counsel.

“Deborah is a Professorial Fellow at Monash University and is a member of the Steering Committee for the Mercer CPA Global Pension Index. Aside from past academic roles, Deborah is a member of the Reserve Bank Payments System Board, and a non-executive director of Kaplan Business School, Kaplan Higher Education and SuperEd. Deborah was also the inaugural Chair of ASIC’s Digital Finance Advisory Board.

“Bryan’s primary focus at BT is to interpret legislative and regulatory change and distil this into meaningful actions for advisers, advice businesses, clients and consumers.

“A principal focus in this role is to assist building consumer trust in the advice process and supporting advisers in raising professional standards, a role that makes him eminently suitable for our Board at a point of time when the advice industry is undergoing major change.

“Aside from his BT role, Bryan is a lecturer on ethics and professionalism in financial advice and the economic and legal context for financial planning and is a member of various working groups at the Financial Services Council.”

Ralston says: “I found my previous time on the SMSF Association Board to be extremely fulfilling, so I was delighted to accept when asked to join again. As our work on the Retirement Income Review highlighted, we have many challenges ahead and I look forward to contributing to the debate, particularly as it affects the SMSF sector.”

Ashenden says: “I am honoured to be asked to join the Association’s Board. Having been a specialist member for the past decade, I am confident my experiences, especially my current role at BT interpreting legislative and regulatory change, equips me to make a meaningful contribution to the Association and the SMSF sector more broadly.”

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The provision of inadequate financial advice can lead to breaches of the Code of Ethics.

On 1 January 2020, FASEA’s Code of Ethics became enforceable by law, requiring advisers to comply with its 12 detailed standards. By the end of 2020, it was announced that FASEA (but not its Code of Ethics) would be disbanded. This article, proudly sponsored by GSFM, examines the importance of upholding these standards and how the provision of inadequate financial advice can lead to breaches.

While FASEA and the standards that comprise its Code of Ethics had been viewed in some quarters as contentious, and have been subject to much discussion, the government’s announcement that FASEA would be disbanded came as a surprise to many.

In a joint statement released in December 2020, Treasurer Josh Frydenberg and Minister for Superannuation, Financial Services and the Digital Economy Jane Hume announced some changes to the financial services landscape in response to recommendations from the 2018 Hayne Royal Commission.

FASEA’s role is to be absorbed by two entities. ASIC’s existing Financial Services and Credit Panel (FSCP) will be expanded to consolidate FASEA’s code monitoring with ASIC’s other monitoring functions, a move designed to help reduce the regulatory burden for financial advisers. Some other elements of FASEA’s role, including administration of the adviser examination, will also be incorporated into FSCP’s expanded mandate.

In terms of the Code of Ethics and its standards, the government will move FASEA’s standard-making functions to Treasury, with the standards to be set by legislative instrument. There has been no indication that the current twelve standards that comprise FASEA’s Code of Ethics will change once this transition is complete.

While no exact date has been provided for these changes, FASEA is funded until 1 July 2021; accordingly, many across the industry expect the transition to be complete on or around this date.

This time last year, when COVID-19 was a virus afflicting China and not yet seen as a significant threat to the world, Australia’s financial services industry was watching the announcements roll out of Treasury as recommendations from the Hayne Royal Commission were issued on a regular basis. These announcements ground to a halt once the government moved into crisis mitigation mode to shield, as far as possible, Australia’s economy from the havoc being wrought by the global pandemic.

Despite this, and the changes businesses had to make to continue operating in remotely during (and after) periods of lockdown, licensees, advisers and advisory practices were grappling with the introduction of FASEA’s Code of Ethics, which became enforceable by law on 1 January 2020. Whether operating from a home office or high rise, advisers (and staff) had to continue meeting the code’s high standards and licensees had to continue to ensure authorised representatives complied with the code. The big change in the future will be that monitoring and enforcement activities will transition to ASIC’s FSCP, rather than falling on the licensee’s shoulders.

Where advisers (or licensees) fail to meet the Code’s standards, ASIC will take enforcement action. It’s important to remember that while FASEA’s Code of Ethics is designed to raise standards of professional and ethical behaviour, it does not replace the laws that govern the provision of financial advice.

Responsibility for applying the tenets of the Code falls on individual advisers continues in 2021; each adviser must be able to explain their interpretation and application of the Code in all dealings with clients.

Underpinned by values

FASEA’s Code of Ethics imposes ethical duties on financial advisers and has been designed to encourage higher standards of behaviour and professionalism in the financial services industry. This is not likely to change when responsibility for the Code of Ethics transitions to Treasury.

FASEA describes the purpose of its Code as follows:

The Code of Ethics imposes ethical duties that go above the requirements in the law. It is designed to encourage higher standards of behaviour and professionalism in the financial services industry.

The Code of Ethics addresses five core values:

1. Trustworthiness
2. Competence
3. Honesty
4. Fairness
5. Diligence

The code requires that financial advisers must act at all times, in all cases, in a manner that is demonstrably consistent with FASEA’s twelve ethical standards, summarised in figure one.

FASEA’s code of conduct comes with guidance. Not all scenarios and client situations will necessarily fit neatly into a standard, nor is the standard a ‘tick and flick’ approach to compliance. Professional judgement and analysis are required and, where an adviser isn’t sure about the right course of action, they need to discuss this with their licensee or their advisory board. After all, as stated in the guidance:

“As with every profession, there is allowance for differences of professional opinion on how the ethical rules of the profession should apply in a particular case.”

The Australian Financial Complaints Authority (AFCA)

In its first two years of operation, AFCA received more than 153,000 complaints and resolved approximately 135,000 disputes; from this, more than $474.5 million was awarded in compensation and refunds to Australian consumers and small businesses.

Investments and advice saw an increase of 22% in the average number of complaints received each month during the 2019–20 financial year, a total of 4,615 complaints. During this period, complaints about investment and advice comprised 6% of the total complaints received by AFCA. Complaints about superannuation were slightly higher at 9% and life insurance represented just over 2% of total complaints. Once again, banking and credit products and services dominated complaints^[1].

Of those 4,615 investments and advice complaints, 1,042 complaints related to financial planners or advisers, which represents 23% of all investments and advice complaints. In total, more than $53.4 million in compensation and refunds was awarded with respect to complaints about inadequate or inappropriate financial advice.

Each of the issues raised in figure two are a breach of one or more of FASEA’s ethical standards. While the specifics of each complaint may result in the breach of different standards, in general terms, it’s likely that those advisers who have been the subject of these complaint areas will have breached common standards as follows.

Misleading product/service information

Complaints in this category have increased year on year. Advisers subject to complaint about providing misleading product or service information are likely to have breached the following standards:

Inappropriate advice

Advisers subject to complaints about providing inappropriate advice will have likely breached the following standards:

Failure to follow instructions/agreement

Where advisers have failed to follow instructions or acted in contravention to agreements, they will have likely breached the following standards:

Failure to act in a client’s best interests

Acting in a client’s best interests is a tenet that underpins FASEA’s Code of Ethics. Where advisers are found to have failed to act in a client’s best interests, they will have likely breached a number of ethical standards, including:

Service quality

Service quality is a somewhat subjective form of complaint and could arise from so many different facets of advice. It could potentially breach each standard, depending on the nature of the complaint.

For example, it may have been a failure to disclose a conflict of interest (standard three) or to provide clear and simple advice (standard five). Maybe the adviser didn’t clearly explain fees and charges (standard 7) or maintain complete and accurate records of advice (standard 8).

Case studies

The following case studies are based on real events; however, the names of people and organisations have been changed, and some details altered. The case studies have been drawn from the Australian Financial Complaints Authority (AFCA) or its predecessor organisation. For each, potential breaches of FASEA’s Code of Ethics are identified.

Case study one: Misleading conduct and non-disclosure

Michael was a long-term client and personal friend of a director of ABC Financial Services, which was the responsible entity of a mortgage fund. Michael was a long-term investor in the fund.

The fund allowed investors to invest in mortgages secured over real property and earn a fixed rate of return over a fixed investment term. It was intended that the fund would apply maximum loan-to-value ratios to the borrowers, and that those maximums would not exceed a fixed percentage of the secured property’s independent valuation. Michael invested $162,500 through his self-managed superannuation fund (SMSF).

The corporate borrower defaulted on the mortgage and the property was subsequently sold at a loss, resulting in only a partial return to the first mortgagee and no return to the second mortgagees, including Michael and his SMSF.

In his complaint, Michael told AFCA the adviser misled him about the creditworthiness of the borrower and the existence of a third mortgage over the property. He said that if he had known about these factors he would not have invested and would not have suffered a loss.

In its response to the complainant, ABC Financial Services said it only provided general advice and disclosed all required information. It also said Michael’s investment history implied he would have invested anyway.

AFCA investigated the information that should have been disclosed and examined whether the adviser misled Michael by omission, whether there was conflict of interest, and what loss was caused by the misrepresentation and non-disclosure.

During the dispute resolution process, AFCA found there had been issues with late payments and the existence of a third mortgage should have been disclosed to Michael in the relevant Product Disclosure Statement. By not disclosing the required information, the adviser had misled the complainant by omission.

However, there was insufficient evidence of any mismanaged conflict of interest for the adviser or ABC Financial Services. Further, AFCA found that Michael would have continued to invest in similar sub-schemes, so therefore decided the complainant had contributed to his losses to such an extent that a 40% reduction in the compensation award was appropriate. As a result, ABC Financial Services was required to:

1. Pay Michael’s SMSF an amount of $97,500.00, plus interest at the rate of 15.95% calculated daily for the period of the investment.
2. Pay additional compound interest at the rate of 1.25% on the total amount from the termination date of the investment to the date of payment.

Breaches of FASEA’s code of ethics

By not disclosing required information and misleading the client by omission, the adviser potentially breached the following standards in the Code of Ethics:

Case study two

Husband and wife Rob and Lisa sought investment advice in their capacity as corporate trustees of their SMSF. This advice was provided by Julia at JJ Financial Planning.

One of the recommended investments was an agribusiness investment, which was subsequently wound up. This resulted in a substantial loss to the SMSF. Rob and Lisa claim they were not advised of the risks associated with this investment.

Julia disputed this claim and said she was supported by the fact that the Statement of Advice she provided – and the client signed – disclosed the attributes of the Project and stated that it was considered “speculative” and provided no guarantee of returns.

However, AFCA’s case manager was not satisfied that Rob and Lisa had sufficient opportunity to read the SOA, because it was signed by them at the same meeting where it was provided to them.

The licensee provided a copy of the adviser’s file notes of the meeting at which this investment was discussed. Those notes do not record that there was any discussion about the risks of investment. As such, AFCA did not believe the file note supported Julia’s statement that she verbally disclosed the risks and told the complainants that the agribusiness project was speculative.

AFCA found in favour of the complainants and determined that:

1. The licensee makes good the losses plus interest calculated at the rate of 5% pa compounded annually from date of the determination to the date of payment, and
2. The Applicants assign to the licensee all their rights and interests in respect of the Project within 14 days of receiving a written request and payment of any transfer or assignment fee from the licensee. Such written request may only be sent by the licensee within 14 days of payment of the amount detailed in the first point.

Breaches of FASEA’s code of ethics

By not disclosing information about the significant risks associated with the investment, particularly as it was regarded as ‘speculative’, the adviser potentially breached the following standards in the Code of Ethics:

Case study three

The complainants, Susan and Colin, were 69 and 72 at the time of seeing adviser Edward, an authorised representative of the financial firm ACME Financial Planning.

Edward recommended that Susan and Colin invest in a Capital Protected Fund (the G Fund). At the time Colin had $337,237 and Susan had $490,820 to invest.

Susan and Colin were classified as Assertive – Balanced investors, which resulted in a recommended asset allocation of 30% defensive assets and 70% growth assets. The complainants say they understood from Edward that the G Fund was capital protected, but that they would get the highest return for the year locked in.

They later found out that they would only get the return available at the anniversary of the product. They claimed had they known this, they would not have invested. Susan and Colin also claimed that Edward did not advise them of the CGT payable when they rolled their money out of the G Fund and overcharged them fees.

AFCA determined that the adviser failed to adequately explain how the product worked. Had the complainants known the level of uncertainty with the fund they would not have invested. The determination also noted that Edward failed the best interest duty by not providing appropriate risk profiling and advice to his clients. Finally, AFCA accepted that the complainants would have been conservatively invested if appropriately advised; this resulted in a total loss of $91,958.34.

This determination was found in favour of the complainants. Total compensation equating to the couple’s loss, plus 1.5% interest per annum compounding annually from determination to the date of payment, was paid.

Breaches of FASEA’s code of ethics

By inadequately describing how the product worked and failing to provide appropriate risk profiling and advice to his clients, Edward potentially breached the following standards in the Code of Ethics:

For the financial advice industry to grow and thrive in the post COVID world, it needs to reclaim trust and build professionalism. Acting ethically will, over time, build trust among Australia’s consumers and increase their confidence in seeking financial advice.

FASEA’s Code of Ethics, in whatever form it takes in the future, will continue to be an important element of journey to restore the industry’s positive reputation and re-establish the industry’s importance to the financial security of all Australians.

———-

[1] AFCA, Annual Review 2019-2020

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Jane Hume

Joint media release with Senator the Hon Jane Hume, Assistant Minister for Superannuation, Financial Services and Financial Technology:

The Morrison Government is implementing further reforms to strengthen the financial advice sector and provide consumers with better access to affordable and high quality financial advice.

Today, legislation was introduced into the Parliament that addresses four recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (FSRC) relating to financial advice. These reforms:

• Strengthen and simplify the ongoing fee arrangement framework in the Corporations Act 2001 to minimise the risk that these types of arrangements give rise to fee for no service conduct (rec. 2.1);
• Amend disclosure requirements to ensure that financial advisers disclose whether they are independent (rec. 2.2); and
• Ensure that only fees for one-off financial advice can be deducted out of MySuper accounts (rec.s 3.2 and 3.3).

Following consultation on these recommendations, the Government has streamlined the approach to implementation to avoid duplication with existing requirements, minimise compliance costs for financial advisers and their clients and ensure all superannuation members are able to access financial advice and pay for that advice from their superannuation.

Simplifying the regulatory framework applying to financial advisers

The Government supports a well regulated and vibrant financial advice sector. As the Retirement Income Review found, the provision of quality financial advice and assistance is important to helping Australians make better informed decisions about the use of their savings in retirement.

The Review also found that most Australians do not access financial advice at retirement due largely to the cost of advice and a lack of consumer trust.

To this end, the Government will further strengthen oversight of financial advisers while at the same time simplifying the regulatory framework governing the provision of financial advice, helping to reduce complexity and cost for advisers.

Specifically, recommendation 2.10 of the FSRC called for a single, central disciplinary body to be established for financial advisers.

The Government will give effect to this recommendation by expanding the operation of the Financial Services and Credit Panel (FSCP) within the Australian Securities and Investment Commission (ASIC).

The FSCP currently supports ASIC in the exercise of its regulatory functions with respect to the making of banning orders against individuals for misconduct.

Expanding the role of the FSCP will leverage its extensive expertise and existing governance structures, avoiding the need to establish a new body to perform this role.

Consolidating this new function within ASIC will also avoid regulatory overlap and minimise the possibility of multiple investigations by multiple agencies into the same conduct related to the provision of financial advice.

The Government will also move the standard-making functions of the Financial Adviser Standards and Ethics Authority (FASEA) to Treasury, with the standards to be set by legislative instrument. Remaining elements of FASEA’s role, including administering the adviser examination, will be incorporated into the FSCP’s expanded mandate.

These reforms will further streamline the number of bodies involved in the oversight of financial advisers, resulting in FASEA being wound up.

The Government would like to acknowledge the important contribution made by the Board and staff of FASEA towards improving the education, training and ethical standards in the financial advice sector.

Legislation implementing these reforms is intended to be introduced into Parliament in the first half of next year.

Treasury and ASIC will work closely with FASEA to ensure an orderly transition to the new regulatory framework.

The Morrison Government is committed to continuing to improve the regulatory framework applying to the financial advice sector and ensuring that Australians can get access to affordable advice to help them plan for their future.

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Association CEO John Maroney says the Association looks forward to working closely with these Ministers at a critical time for superannuation and the financial services industry more broadly.

“The FASEA reforms, the Financial Services Royal Commission and the Productivity Commission report will all generate critical issues for the industry and consumers, and the Association is keen to being involved in these discussions with all three Ministers.

“The Association has had previous dealings with Josh Frydenberg when he was Assistant Treasurer, and based on that experience we are confident he will listen closely to our views on the issues that are likely to emerge over the coming months.

“We would also like to update the Ministers on our opposition to Labor’s proposal to cancel cash refunds for excess dividend imputation credits, and why we believe it would be highly detrimental to those SMSF trustees and members who have worked hard to be self-sufficient in retirement.”

The Association also looks forward to working with Prime Minister Scott Morrison on key issues facing the superannuation and financial services sector. The Association has previously had a constructive working relationship with Mr Morrison as Treasurer, allowing for frank and robust discussion when he was responsible for reforming the superannuation tax concessions.

Maroney says the Association would like to put on the record its thanks to Kelly O’Dwyer, who worked closely and cooperatively with the Association in her role as Minister for Revenue and Financial Services.

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Mathias Cormann

Having the portfolio of Assistant Treasurer in Cabinet and combined with Small Business is a very positive development for the self-managed super sector, says SMSF Association Managing Director/Chief Executive Officer Andrea Slattery.

“There is a natural symbiosis between small business and SMSFs, and for someone of the calibre of Kelly O’Dwyer to be appointed to both portfolios is a sign this new Government is placing the right emphasis on these critically important areas for the economy.

“Kelly comes to these portfolios with the experience gathered as Chair of the House of Representatives Economics Committee, and then as Parliamentary Secretary to the Treasurer.

“The Association believes she has the requisite skills to quickly come to grips with the many outstanding issues in these portfolios that are demanding attention.

“We are optimistic that Kelly, in partnership with the new Treasurer, Scott Morrison, and the reappointed Finance Minister Mathias Cormann, can provide the leadership that will see a concerted response to the current and future reform agendas.

“The combination of all three in Cabinet is an excellent move and a recognition of the importance the Government is placing on future economic and fiscal policy.

“It should mean reports such as the Financial System Inquiry and the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into the financial services industry will be scrutinised sooner rather than later and a Government position formulated.

“Both these reports are critical to the SMSF sector in particular and superannuation more broadly, so it’s imperative to get a response soon from the Government.”

Slattery says giving the Treasury portfolio to a proven performer in Scott Morrison is to be applauded. “In his previous portfolios he demonstrated a capacity to strongly deliver policy to meet the future needs of Australians, and we expect it to be no different in Treasury.

“I am also looking forward to meeting with Prime Minister Malcolm Turnbull to update him on the role that SMSFs, as the largest superannuation sector, play in the economy.

“Given the ambitious agenda he has set for Government and his commitment to economic policy, I am certain he will want to discuss how the almost 1.1 million SMSF trustees, hailing from the professional, small business, self-employed and primary production sectors and representing $590 billion in FUM, can significantly contribute to growth.”

Slattery says the Association wants to thank the outgoing Assistant Treasurer, Josh Frydenberg, for all his significant work to progress the reform agenda and congratulate and wish him well in his new portfolio and important promotion to Cabinet.

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Deborah Kent

The Association of Financial Advisers (AFA) has welcomed the appointment of the Hon. Kelly O’Dwyer, MP as Assistant Treasurer and Minister for Small Business.

Commenting on the appointment, AFA National President, Deborah Kent, said with financial services being such a significant sector of the Australian economy, Ms O’Dwyer has an important portfolio.

“Policy in the area of financial services has the opportunity to help thousands more Australians secure their own financial future,” she said. “This, together with small business as the engine room of our country, means that Ms O’Dwyer will have significant decisions to make in the Government’s response to the Financial System Inquiry, the area of professional standards for financial advice and also in regard to the future of life insurance advice.”

Ms Kent said the AFA is looking forward to the opportunity to consult the Minister.

“These issues have significant implications for the future of self-employed advisers and small business financial advice practices – two groups that ensure appropriate competition in financial services,” she said. “We also look forward to discussing how to improve the retirement outcomes of women.”

The AFA also thanked outgoing Assistant Treasurer the Hon. Josh Frydenberg for his accessibility whilst in the role. “We wish him well in his new portfolio,” Ms Kent said.

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Sally Loane

The Financial Services Council (FSC) welcomes the Superannuation Legislation Amendment (Trustee Governance) Bill 2015 which was introduced to Parliament today by the Assistant Treasurer, Josh Frydenberg.

The Bill is part of a package of reforms designed to increase competition and raise standards of governance across the entire superannuation industry. Together these reforms will protect consumers from conflicts of interest and will lower fees.

Sally Loane, CEO of the FSC said: “The Financial Services Council welcomes the first instalment of a package of reforms that are in the best interest of consumers and will deliver lower fees to working Australians.

“The reforms introduced to Parliament today will require all superannuation funds to appoint independent directors onto the boards of super funds. They will apply equally to all APRA-regulated funds − retail, industry, public sector and corporate − and will increase consumer protections across the industry.”

“Every working Australian – 11.5 million people – who entrusts a super fund to manage a large proportion of their salary over their entire lifetime should welcome these reforms. They are sensible consumer protections which exist throughout corporate Australia, and which are supported by a broad range of consumer groups.”

“There is no downside for consumers for their super funds to include a proportion of independent directors with diverse skills on their boards.

“The previous Labor Government’s Super System Review (Cooper Review) in 2010 and the recent 2015 Financial System Inquiry both considered this matter and, following broad consultation, recommended that it was global best practice and in the interests of consumers for superannuation funds to be required to appoint independent directors.”

The FSC urges the Parliament to proceed with complementary reforms to increase competition in the superannuation industry to facilitate fee reductions.

Currently, some consumers are not entitled to choose their own superannuation fund and default superannuation funds are not required to compete for new members, protecting inefficient funds from the discipline of open market competition.

Ms Loane also said: “Legislation currently denies Australians joining superannuation funds which have lower fees than some default funds.”

“For example, ‘MySuper’ options such as Bendigo MySuper at 0.65%, ANZ MySuper at 0.60%, and AMP MySuper 0.85% are all below the industry average, but are excluded from competing.”
“Governance and competition reforms will provide Australian consumers with certainty that the entities managing the $1.4 trillion in retirement savings have the highest standards of governance and the lowest fees, regardless of whether they are an APRA-regulated retail, industry, public sector or corporate fund.”

“Consumers will benefit from more competition, choice and control of their superannuation,” Ms Loane said.

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Josh Frydenberg

Demonstrating its ongoing commitment to keep members informed about regulatory change in the advice space, the Association of Financial Advisers (AFA) will host a business lunch with the Hon. Josh Frydenberg MP in Melbourne on Monday 21 September at Crown.

“The advice sector is seeing the last pieces of the puzzle come together after a period of five years of regulatory change,” said AFA CEO Brad Fox. “A forum with the Assistant Treasurer provides our members with the opportunity to hear more from the Government on the remaining changes.”

The Assistant Treasurer is expected to speak on a number of key concerns impacting the financial advice sector, including the Life Insurance Framework, education and professional standards, and the Financial System Inquiry. Attendees will also have the opportunity to put their questions to the Minister.

“There has been considerable cultural change to our profession already and advisers are proactively facing into the changes,” Mr Fox said. “The AFA believes it is important to keep the lines of communication between advisers and legislators open and maintain regular contact between Mr Frydenberg and the grass roots of advice.”

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Brad Fox

The Association of Financial Advisers (AFA) has confirmed that the Life Insurance Framework (LIF) includes a very clear statement protecting the existing level commission regime.

The LIF agreement between the AFA, the Financial Services Council (FSC) and the Financial Planning Association (FPA) was released on 25 June 2015 by the Assistant Treasurer, Josh Frydenberg. It was headed by a clear statement, “This proposal is not intended to limit the industry’s current ability to operate on a level commission or fee-for-service basis.”

AFA CEO Brad Fox said the Financial System Inquiry recommendation on level commissions did not seek to set the rate, suggesting that it should be left to the marketplace to set. “Any move to reduce the rate of level commission payments has nothing to do with the quality of financial advice,” he said. “The AFA will strongly resist any concerted actions by the life insurers to collectively set a cap on the rate of level commissions.”

Mr Fox said, “Any move by insurers, through the FSC, to collectively cap level commissions is profiteering at the expense of advisers and their practices. It would not be acceptable. It is outside of the agreement.”

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