Risk Regulatory Update
/FPA updates Professional Code
After consultation with members, the Financial Planning Association has updated its Professional Code, modifying it from a rules-based to a principles-based system. The idea was to move on from an extensive set of rules to focusing on professional judgement.
The 10 principles of the modified FPA Code are split into three elements: Being, Knowing and Doing. The focus is on putting the client first, integrity, objectivity and fairness, skills, knowledge, professional development, professional behaviour, competence, diligence, confidentiality and data protection, while also promoting and supporting integrity in others.
Industry funding model discussion paper released
A discussion paper on the Australian Securities and Investments Commission (ASIC) industry funding model has been released for public consultation by the government to ensure they remain current and appropriate.
Family violence exemptions for insurers
ASIC has provided certain notification exemptions for insurance companies to help avoid risks of family violence, for example, when the notification provided to joint policyholders would reveal one policyholder’s location or an incoming cash payment.
Insurers were previously required to provide a Cash Settlement Fact Sheet and transaction confirmation to joint policyholders when a claim was to be settled in cash. Now, if an insurer reasonably believes that providing them would pose a risk of family violence, they do not need to provide both policyholders with the notifications.
Insurers must keep records of the reasons for their beliefs for three years. This relief expires in 2027 when the legislation will be reviewed.
YFYS review begins
The Financial Services Compensation Scheme of Last Resort Levy Bill 2022 has been tabled by parliament, with the final touches being put on the Hayne Royal Commission recommendations from 2021. Consultation is now starting on the Your Future, Your Super (YFYS) laws. The consultation is examining any unintended consequences of the implementation of the YFYS laws.
A technical working group is being set up to work through the issues and consider the solutions. Feedback is open until 14 October 2022.
ASIC review of non-disclosure ‘fishing’ in TPD cover continues
ASIC has concerns about disability insurance companies deliberately seeking non-disclosures by claimants to find reasons to deny claims. ASIC has had long-running concerns about intrusive claims handling practices such as investigations and surveillance. A review of almost 4,800 individual claims found that 252 claims had non-disclosure investigations and physical surveillance was used in 57 claims.
Five insurers were under extra scrutiny for non-disclosure investigations because the claim was lodged within three years of the beginning fo the policy or renewal, which heightened the risk of the insurer ‘fishing'. The reviews into total and permanent disability insurance claims started in 2019.
Treasury releases Quality of Advice Review proposal
A proposal paper has been released regarding the Quality of Advice Review (QAR) by Michelle Levy, the chair of the review board. Levy made several proposals, including that ‘general advice’ should be completely removed, while ‘personal advice’ should be a little broader for clarity. Levy thinks superannuation trustees should be able to provide personal advice to members and have discretion on how that advice is charged.
The proposals include:
The provision of ‘personal advice’ should be regulated by the financial services regime, with definitions modified.
‘General advice’ should be removed.
Financial advisers should be required to give ‘good advice’.
A financial adviser giving personal advice should be a ‘relevant provider’
Super fund trustees should be able to offer members personal advice.
Super fund trustees should be able to choose how to charge members for personal advice.
Superannuation trustees should be able to pay a fee from a member’s super account to an adviser for personal advice regarding their superannuation
Annual written consent should be provided to an adviser when ongoing fees are to be deducted.
Those providing personal advice should be able to choose what sort of advice would best suit the client, including the choice of whether to provide a Statement of Advice (SoA).
Clients should have access to the financial services guide or information regarding remuneration and other benefits, dispute resolution schemes and how to access the Australian Financial Complaints Authority (AFCA).
Reporting requirements under design and distribution obligations should be simplified to only be provided when a complaint is made regarding a certain financial product.
Adequate time should be given to transition to these changes
AFA and FPA discussing merger
The Financial Planning Association of Australia (FPA) and the Association of Financial Advisers (AFA) have signed a memorandum of understanding and are seeking feedback from members on a merger plan. A new name for the merged entity will be discussed, with the intention for FPA chief executive Sarah Abood to take on the role of CEO of the merged entity, while AFA CEO Phil Anderson would be the general manager. The merger vote is due by the end of 2022.
50% pass rate for July and August adviser exams
Just 328 of 628 financial advisers have passed the July and August financial adviser exams, equating to a 52 per cent pass rate. Seventy-six per cent of the sittees were resitting the exam for at least the second time. This is a very slight improvement on the 40 per cent or so of candidates who passed the May 2022 sitting.
