The Australian government has disbanded its version of the NZ Code Committee for Financial Advisers just three years after creating the controversial stand-alone body.
Under shock measure released last week, the Australian Financial Adviser Standards and Ethics Authority (FASEA) will be wound down with its duties re-housed in other government agencies.
FASEA was set up in the wake of the 2013 ‘future of financial advice’ (FOFA) reforms across the Tasman that, among other items, recommended raising adviser education and ethical standards.
Established in 2017, FASEA administered and approved adviser education standards, which now require degree-level proficiency.
In a statement, Jane Hume, Assistant Minister for Superannuation, Financial Services and Financial Technology, said, FASEA’s functions would be split between the Financial Services and Credit Panel (FSCP) within the Australian Securities and Investment Commission (ASIC) and Treasury.
Hume said the government would move the FASEA standard-making powers to Treasury with the rules “to be set by legislative instrument”.
“Remaining elements of FASEA’s role, including administering the adviser examination, will be incorporated into the FSCP’s expanded mandate,” she said.
The ASIC-controlled FSCP would also manage all financial advisory disciplinary matters in a decision that scrapped previous plans to establish a new body to handle complaints against advisers.
“Expanding the role of the FSCP will leverage its extensive expertise and existing governance structures, avoiding the need to establish a new body to perform this role,” Hume said.
“Consolidating this new function within ASIC will also avoid regulatory overlap and minimise the possibility of multiple investigations by multiple agencies into the same conduct related to the provision of financial advice.”
In NZ, the Financial Advisers Disciplinary Committee operates independently of the regulator to police Code breaches.
Hume said the new streamlined financial adviser regulatory system, which essentially grants central government more direct powers over the industry, were designed to lower the cost of advice – a problem flagged by ASIC in a consultation process launched in November.
The new rules “will further strengthen oversight of financial advisers while at the same time simplifying the regulatory framework governing the provision of financial advice, helping to reduce complexity and cost for advisers”, she said.
Head of the Australian Financial Planning Association, Dante De Gori, said in a statement that the current complex regulatory system was “stifling” the advice industry and driving up costs.
“This announcement is a step in the right direction, particularly for financial planners who, in some instances, are struggling to remain commercially viable as the cost of advice has skyrocketed in recent years as regulatory and compliance costs continued to rise,” De Gori said.
Last week ASIC also released a guide on how it would regulate ‘conflicted and other banned remuneration’ as the current grandfathering provisions end next year.
Australia has long outlawed a wide range of previously common practices include commissions on investment products, volume-based arrangements and so-called ‘shelf space’ fees, where product providers pay (by various methods) for preferential access to investment platforms.
“The ban on conflicted remuneration for financial product advice applies to all benefits given on or after 1 January 2021. Product issuers are required to provide rebates to clients for all previously grandfathered benefits that they remain legally obliged to pay on or after 1 January 2021,” ASIC says.
“ASIC will continue to monitor industry’s arrangements in relation to the ban on conflicted and other banned remuneration and will consider taking action where we find misconduct.”
The Financial Markets Authority (FMA) is currently consulting on proposed guidance for KiwiSaver fees that could see the end of adviser commissions if the cost is carried by all scheme members rather than individual advised clients. Submission on the FMA KiwiSaver fees proposals close today (Monday December 14).