Risk Regulatory Updates

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AIOFP and TSA join forces to create one association

The Association of Independently Owned Financial Professionals (AIOFP) and Tax & Super Australia (TSA) are creating a single association, with the joint entity having 10,000 members. The new organisation will have greater lobbying power and benefit members of both organisations.

Regulations for financial advisers tabled in parliament

A recommendation from the Royal Commission is being introduced into parliament, with financial advisers to disclose conflict of interests and not charge fees for no service.

Advisers will need to provide clients with a fee disclosure statement that covers what is being charged and service entitlements for the coming year. Permission must be given to renew the fee arrangements and written consent must be provided before fees are deducted on an ongoing basis.

Advisers must disclose a lack of independence, in writing, so those saying they are ‘independent’ or ‘impartial’ must not receive commissions, remuneration based on the volume of business with a certain supplier, or gifts.

Superannuation funds can’t charge fees on an ongoing basis for personal advice provided to MySuper products for 12 months, and super funds can’t charge fees for advice unless the fee is part of an arrangement that the member has agreed to. Infra-fund advice is excluded.

FASEA being wound up

The Financial Adviser Standards and Ethics Authority (FASEA) is to be closed, with two government bodies taking over. The standard-setting element of FASEA will be taken on by Treasury while remaining functions will be taken over by the Financial Services and Credit Panel (FSCP). Operation of FSCP will be taken on by the Australian Securities and Investments Commission (ASIC) to streamline the number of organisations governing financial advisers. This move is another recommendation from the Royal Commission, where a single, central disciplinary body should be established for financial advisers.

FASEA approves new degrees, releases November exam results

FASEA has approved:

  • Bachelor of Commerce majoring in Financial Planning at the University of New South Wales from September 2021

  • Graduate Diploma of Financial Planning at the University of Tasmania from semester one, 2021

  • Ethics and Professionalism bridging course at the University of Tasmania from semester one, 2021

The ninth Financial Adviser Exams were held in November 2020, with 80 per cent of those sitting the exam for the first time passing, making the overall pass rate 76 per cent. Just over a thousand advisers sat the exam.

APRA takes action against Westpac over liquidity standards

The Australian Prudential Regulation Authority (APRA) has taken enforcement steps against Westpac Banking Corporation after material breaches of liquidity standards. The breaches were from 2019 and 2020 and relate to incorrect treatment of some funding and loan products in terms of calculating the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).

The breaches have been rectified and Westpac’s current liquidity position is not concerning to regulators, though APRA says they demonstrate weaknesses in risk management and oversight, risk control frameworks and risk culture.

ASIC: group insurance cover poorly designed

An ASIC investigation has found that group insurance cover is lacking in good design, with members being defaulted based on assumptions into high-premium occupation groups. Members put into high-risk occupational groups pay almost twice as much in insurance premiums compared with the lowest risk group, and in five of 20 case studies, the difference was three or four times as much.