Risk Regulatory Updates
/AFA outlines vision for advice
The chief executive of the Association of Financial Advisers (AFA), Phil Kewin, spoke at the 2020 AFA Vision Conference about the association’s goals for the future of financial advice. After responding to new legislation for several years running, Kewin outlined the blueprint for the future, which include:
Increasing accessibility and affordability of financial advice
Enhancing professionalism in the industry
Maintaining consumer protections
Increasing public confidence and awareness
Facilitating policy settings so good planners can thrive
Kewin had recommendations regarding the Royal Commission response, smarter regulation priorities, and the long-term vision of the AFA. Visions included having financial advice be tax-deductible, have an effective registration and licencing model, looking into technology, and address the cost and efficiency of providing financial advice.
Future of Advice report published
A Rice Warner report commission by the Financial Services Council (FSC) recommends significant changes to financial advice. The report proposes a host of changes to definitions, documentation, tax-deductibility, and overall system principles. The FSC is to engage with stakeholders to launch a policy document in 2021.
The report promises to start policy debate on rebuilding a simpler and more affordable financial advice industry, with the following proposals:
Advice should fall under just two categories: strategic advice or financial product advice.
Education, information and general advice should fall under the term ‘general information’ while personal advice should be separated into ‘simple’ or ‘complex’ advice.
Simple personal advice deals with superannuation, life insurance, debt and budgeting, while complex personal advice includes complex or risky products or topics.
Simple personal advice will be cheaper and a reduction in compliance burden.
Rice Warner recommends that financial advice should be tax deductible up to $500 per year for an individual or $1,000 for a couple.
APRA and ASIC publish life insurance claims and disputes data
The fifth set of data has been published by APRA and the Australian Securities and Investments Commission (ASIC) on life insurance performance in how insurers handle claims and disputes. The report covers the rolling 12-month period from 1 July 2019 to 30 June 2019 for 20 life insurance companies.
ASIC reviewing limited advice
A new consultation paper is to be released in November 2020 asking financial advisers to tell the regulator what barriers are still in place to prevent limited advice provision. Guidance has previously been provided, however, some players are finding it difficult to provide limited advice.
Single disciplinary body for advisers set for 2021, government says
After being put on pause, the single disciplinary body for advisers and the compensation scheme of last resort is to be legislated in 2021. Senator Jane Hume told the AFA Vision Conference audience the government agrees with a single body to encourage greater professional discipline in the industry. The intention is to introduce legislation in mid-2021.
Complaints against insurers drop in 2020 financial year
Consumers complaining about insurers breaching industry code of practice dropped by a large margin in the 2020 financial year, with just half the complaints revealing actual breaches, says the Life Code Compliance Committee. In the last financial year, there were 127 breach allegations received against life insurers, with 102 assessed, and 65 determined as real breaches. Most breaches were regarding the life companies’ complaints handling and claims obligations. There was a 36 per cent drop in code breach allegations compared with 2019.
Life companies self-reported 44 code breaches across the year, with 33 assessed as serious breaches.
