Senate ticks raise sector stability hopes

The new laws will provide stability for the industry.

10-Feb-2017

By Sarah Kendell

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Advisers can put much of the regulatory uncertainty that dominated 2016 behind them following the passing of two major pieces of legislation that foreshadow significant changes in adviser remuneration practices and educational standards.

The Senate passed both the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 and the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 yesterday, guaranteeing both sets of reforms will now be passed into law following royal assent.

A majority of senators agreed to the motion to read the bills a third time, despite Labor senator Jacinta Collins’ reservations that reforms to life insurance in particular did not go far enough.

“Labor will support the passage of modest reforms to adviser remuneration because they represent steps to improve the quality of advice and better align the interests of those providing advice with consumer interests,” Collins said.

“However, they only go so far – a strong financial services sector depends on Australians having confidence in that sector, which is why we need to get to the bottom of the culture that has allowed repeated misconduct to occur.”

Collins also highlighted “the concerns of some advisers who feel their voice has not been heard in the policy development process,” while pointing to more life insurance issues that had not been addressed, such as remuneration payments to claims handlers.

Both the FPA and Association of Financial Advisers (AFA) welcomed the passage of the reforms.

AFA chief executive Brad Fox said it was now time for other parts of the insurance sector to play their part in improving consumer outcomes.

“The life insurance framework is wider than the bill – it includes broadening approved product lists, simplifying statements of advice and, very importantly, a life insurer code of practice,” Fox said.

“Progress has been made in these areas, but more work is required from the insurers, superannuation trustees, ASIC and some licensees to carry their share of life insurance reform, and we will continue to push them to complete these reforms by the new remuneration start date.”

Meanwhile, work has begun on the design of the new professional standards body to oversee key areas of adviser education legislation, including the exam that all advisers are mandated to complete by 1 January 2021.

FPA head of policy and government relations Ben Marshan said the association would meet Minister for Revenue and Financial Services Kelly O’Dwyer next week and expected the make-up of the board would be announced by March at the latest.

“The minister asked us late last year for ideas around the nominations to the board, which we and other industry and consumer groups provided,” Marshan said.

“We’re currently working on a series of recommendations that the FPA and its membership will put to the new standards-setting body around the five main elements of the new professional standards and education framework.”

Commenting on the passage of the professional standards laws, O’Dwyer said they demonstrated “the commitment of this government to building trust and confidence in the financial advice industry”.

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