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The Government’s Financial Sector Reform Bill to allow for the implementation of key recommendations of the Financial Services Royal Commission was introduced to the House of Representatives today.
The Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020 contains three reforms, with most of the changes scheduled to come into effect on 1 July 2021.
The Bill limits the charging of advice fees but allows for funds to continue to offer intra-fund advice, and importantly – in a change from the draft legislation, allows for funds to deduct fees for non-ongoing financial advice from MySuper products. AIST welcomes this change, which follows industry advocacy pointing out the benefit and appropriateness of intra-fund and one-off advice for members who are in MySuper products.
In brief, the reforms are:
Ongoing fee arrangements: Financial service providers that receive fees (fee recipients) under an ongoing fee arrangement will be required to provide clients with a single document each year which outlines the fees that will be charged and the services which the client will be entitled to in the following 12 months and which seeks annual renewal from clients for all ongoing fee arrangements. Additionally, written consent must be obtained before fees under an ongoing fee arrangement can be deducted from a client’s account.
Disclosure of lack of independence: Financial services licensees or authorised representatives will be required to give a written disclosure of lack of independence where they are authorised to provide personal advice to a retail client.
No deducting of ongoing advice fees from MySuper: The Bill amends the SIS Act to provide greater protection for superannuation members against paying fees for no service. The amendments increase the visibility of advice fees for all superannuation products. They prohibit the charging of fees to a MySuper product for ongoing financial product advice (fee for personal advice for a period of over 12 months). As noted above, superannuation trustees retain their existing ability to collectively charge members for intra-fund advice and can charge for one off advice within MySuper.
For more details, the Bill and Explanatory statement can be read here.
09 December 2020