Australia’s new government is proposing to revise many of the previous administration’s recently adopted financial reforms, including a fiduciary duty for financial advisors, in an effort to ease the burden on the financial industry in that country.
An election earlier this year saw the incumbent Labor Party unseated by a new coalition government, which is now aiming to undo some of its recent financial reforms. The new government says that, while it supports the principles of these reforms, the previous government went too far, “creating unnecessary complexity, imposing significant burdens on industry and reducing the availability and increasing the cost of advice to consumers.”
As a result, it is announcing a series of proposed amendments to those reforms that are designed to reduce the burden on the industry, including changes to the “best interests” duty that was adopted. The government says that it will “amend the best interests duty to ensure that advisors can be confident that they have provided compliant advice to their clients.”
It says it will also amend the duty to explicitly allow for the provision of scaled advice. “The changes will enable advisors to agree on the scope of advice to be provided with their clients, whilst ensuring that the advice is still appropriate for the client,” it says, noting that this will enable consumers to receive “one-off advice” from financial advisors.
It is also planning reforms to ensure that the ban on conflicted remuneration only applies to personal financial advice. “Applying the ban on conflicted remuneration to general advice risks limiting the availability of this type of advice and unnecessarily burdens industry by capturing staff not directly involved in providing advice to clients,” it says.
Additionally, it’s proposing to do away with a requirement for clients to sign off on continuing an existing arrangement with their advisor. “This requirement adds a burdensome layer of red tape to industry and does not provide any significant consumer protection,” it says.
And, it will amend the requirement to provide annual fee disclosure statements so that it only applies to new clients. “Applying this requirement to existing clients is overly onerous as the fee disclosure arrangements are significantly more costly to apply to [existing] clients,” it says.
These, and other changes, were announced by Australian assistant treasurer, senator Arthur Sinodinos, who noted that the planned reforms are expected to save the financial industry an estimated A$90 million in implementation costs and reduce annual compliance costs by an average of approximately A$190 million per year.
“I am confident that these reforms will ensure that the integrity of the financial advice framework is maintained whilst delivering a system that offers affordable and accessible financial advice to the Australian community,” said Sinodinos.
The opposition has roundly criticized the planned revisions saying that the proposed changes “are bad news for investors and people saving for their retirement” that will unwind “reforms designed to restore faith in and professionalise the financial advice sector and ensure that Australians are getting financial advice that is in their best interests.”
“The Abbott government has sent a clear signal that poor practices of the past including self-interest, a culture of sales over advice, hidden fees and charges, as well as high commissions which led to some of the most spectacular and devastating losses for thousands of ordinary people are back on the table,” it said in a statement.
The opposition said that its shadow cabinet and caucus will examine the proposed changes closely, but that it “is not minded to support what is clearly a direct attack on investors that will drive the quality and motivations of the financial advice sector in the wrong direction.”
The proposed rollback of many of Australia’s recent reforms comes as Canadian securities regulators said last week that they plan further study of possible reforms in Canada, including the possible introduction of a best interests duty for financial advisors.