Government response to the FSI Report on Tuesday 20 October 2015 represents yet another milestone in our journey to becoming a widely respected profession. Whilst we await further detail on some of these areas, we welcome the announcement, particularly the restriction of the term Financial Planner / Financial Adviser.
Protection of the term Financial Planner / Financial Adviser
After years of advocacy by the FPA, the government has committed to restricting usage of the terms financial planner/adviser to those listed on the ASIC Financial Adviser Register. This is undoubtedly a major leap forward for consumer protection, and the future of the financial planning profession.
Professional Standards, Education and Ethics
The government has agreed to support recommendations that improve trust and confidence in the financial planning profession, including:
Financial planner education standards will be raised to a relevant tertiary degree for new advisers
Financial planners will be required to pass an exam, complete ongoing CPD, subscribe to a code of ethics and undertake a professional year
Implementation of appropriate transition arrangements for existing advisers
The establishment of an independent education standards body will be recognised in legislation
ASIC’s Financial Adviser Register will be enhanced to include relevant bans and disqualifications or code breaches.
Further the government has also agreed to support the recommendation to rename ‘general advice’, a recommendation put forward last year in the FPA 10 Point Plan.
Legislation to bring the above into effect will be introduced by mid-2016.
The government does not support the FSI recommendation to change the life insurance commission model to level commissions only. The government does however continue to support the proposal announced by the previous Minister on 25 June 2015. This position will be reviewed in 2018 and we will continue discussions with the new minister on the detail of this proposal.
Stockbrokers and Mortgage Brokers
The government has asked ASIC to review the effect of commissions in stockbroking and mortgage broking.
Consumer Protection and ASIC Powers
The government has agreed to support the recommendations for ASIC to have the tools to better prevent bad products entering the market, and introduce new accountability obligations on product manufacturers. This includes supporting the recommendation to strengthen product issuer and distributor accountability, and the introduction of product intervention powers. The government also supports the recommendation to enhance ASIC’s powers to ban individuals from operating within the financial services industry.
The government has agreed with the recommendation to enshrine the objective of superannuation in legislation. The government has not supported the FSI recommendation to ban borrowing in superannuation, as it believes there is insufficient data to justify support of this recommendation.
The government will however commission the ATO to monitor the leverage and risk in the superannuation system, and report back to government after three years.
The government will remove the default fund provisions in the workplace modern awards to provide all employees with the ability to choose the fund into which their Superannuation Guarantee contributions are paid.
The government has supported the recommendation to allow trustees to pre-select income products for retirement for members. The government will also continue to work to remove the impediments for retirement income product development. This work will continue as part of the tax-white paper and retirement income review.