10 June 2022

Ms Michelle Levy
Reviewer
Quality of Advice Review Secretariat
Financial System Division
The Treasury
Langton Crescent
PARKES ACT 2600

via email: advicereview@treasury.gov.au

Dear Ms Levy,

Re: Quality of Advice Review – Issues Paper (March 2022)

The Financial Planning Association of Australia 1 (FPA) welcomes the opportunity to provide this response
to the Quality of Advice Review – Issues Paper, released 25 March 2022.
The FPA supports and has long been calling for a similar review of the legal and regulatory framework for
financial planning to improve Australians’ access to affordable, high quality, professional financial advice.
In our view, the regulation of financial advice as a financial product has never sat well with the
professional financial planning services provided by FPA members. While financial planners use the
financial products otherwise regulated under financial services law, financial planners themselves provide
a professional service, assisting their clients to understand and articulate their goals and objectives,
recommend strategies in the form of a financial plan so their clients can live their best lives, and keep
them on track to achieving their goals as life throws up challenges and opportunities.
This disconnect - between being regulated as a product distributor but providing a personal professional
service - has been made all the more difficult due to financial planners being required to comply with four

1
The Financial Planning Association (FPA) is a professional body with almost 12,000 individual members and affiliates of whom
around 10,500 are practising financial planners and nearly 5,000 are CFP professionals. Since 1992, the FPA has taken a
leadership role in the financial planning profession in Australia and globally:
• Our first “policy pillar” is to act in the public interest at all times.
• In 2009 we announced a remuneration policy banning all commissions and conflicted remuneration on investments
and superannuation for our members – years ahead of the Future of Financial Advice reforms.
• The FPA was the first financial planning professional body in the world to have a full suite of professional regulations
incorporating a set of ethical principles, practice standards and professional conduct rules that explain and underpin
professional financial planning practices.
• We have an independent Conduct Review Commission, chaired independently, dealing with investigations and
complaints against our members for breaches of our professional rules.
• We built a curriculum with 18 Australian Universities for degrees in financial planning through the Financial Planning
Education Council (FPEC) which we established in 2011. Since 1 July 2013 all new members of the FPA have been
required to hold, or be working towards, as a minimum, an approved undergraduate degree.
• When the Financial Adviser Standards and Ethics Authority (FASEA) was established, the FPEC ‘gifted’ this financial
planning curriculum and accreditation framework to FASEA to assist the Standards Body with its work.
• We are recognised as a professional body by the Tax Practitioners Board.
laws, and regulated by eight regulators and a variety of oversight and complaints bodies including AFSLs,
professional associations, two ombudsman services and the courts.
For this reason, the FPA welcomes the Review’s work to identify and provide practical solutions to
improve the operation and structure of the financial planning profession to simplify and support the
professional services provided by the financial planning profession for the benefit of Australian
consumers.
The FPA would welcome the opportunity to discuss with the Review the issues raised in our submission.
Please contact myself, or Ben Marshan CFP® (Head of Policy), on 02 9220 4500 or policy@fpa.com.au to
further discuss the suggestions raised.

Yours sincerely,

Sarah Abood
Chief Executive Officer
Financial Planning Association of Australia

Encl.
QUALITY OF ADVICE REVIEW SUBMISSION
RESPONSE TO ISSUES PAPER
Financial Planning Association of Australia
10 June 2022
INTRODUCTION
Who is the FPA?
As Australia’s leading professional association for financial planners, the Financial Planning Association
(FPA) represents the interests of the public and almost 12,000 members, including nearly 5,000 CFP ®
professionals. Since 1992, the FPA has taken a leadership role in the financial planning profession in
Australia and globally with our policy and advocacy work focusing on three pillars, that reflect our
fundamental goals of ensuring policy is:
• CONSUMER-FOCUSED
It should support access by all Australians to affordable and professional financial advice and
ensure consumers’ interests are advanced when accessing financial advice.
• PROFESSIONAL
It should enhance the professionalism of financial planning and promote the health of the
financial planning profession as a whole.
• ASPIRATIONAL
It should reflect best practice and the aspiration of members of the Financial Planning
Association of Australia to set and meet higher standards of professional competence and
conduct.
These are the core issues that formed the foundation of the FPA’s policy platform - Affordable Advice,
Sustainable Profession2, released in June 2020 (see Appendix 1).

Our regulatory environment

To provide financial advice services to consumers, financial planners are currently required to comply with
four laws regulated by eight regulators, additional oversight from Australian Financial Services Licensees
and professional associations (such as the FPA), additional consumer complaint mechanisms through
two ombudsman services and the courts, and potentially subject to five disciplinary processes.
The legislation includes:
• Corporations Act 2001
• Tax Agent Services Act 2009
• Anti-Money Laundering and Counter-Terrorism Financing Act 2006
• Privacy Act 1988
The regulators include:
• Australian Securities and Investment Commission (ASIC)
• Tax Practitioners Board (TPB)
• Office of the Australian Information Commissioner (OAIC)
• Australian Transaction Reports Analysis Centre (AUSTRAC)
• Australian Prudential Regulatory Authority (APRA)
• Australian Taxation Office (ATO)
• Australian Competition and Consumer Commission (ACCC)

2
‘Affordable Advice, Sustainable Profession’, FPA Policy Platform, 3 June 2020, https://fpa.com.au/financial-planning-
advocacy/fpa-policy-platform/.
 • The Treasury through powers conferred on the Minister for Superannuation, Financial Service
and the Digital Economy (previously administered by the Financial Adviser Standards and Ethics
Authority)
The ombudsman services include:
• Australian Financial Complaints Authority (AFCA)
• Australian Small Business and Family Enterprise Ombudsman (ASBFEO).
Additionally, the same piece of advice will have oversight and interpretation by:
• Australian financial service licensees,
• ASIC,
• The Financial Services and Credit Panel (FSCP),
• The Courts, and
• Professional bodies such as the FPA.
Each law, regulator, ombudsman and oversight bodies’ interpretations and decisions have an effect on
the advice process and therefore the cost and efficiency of providing advice to Australian consumers.
This is also all before considering the technical aspects of the strategies and products being
recommended to clients to implement their financial plan.

The challenges facing financial planning in Australia

According to the most recent data, there are 16,634 3 registered financial advisers, a 12.23% decrease in
practitioners this financial year (and a more than 40% decline since the profession’s peak). Given 1 July
2021 marked the first time since 2015 that adviser numbers had fallen below 20,000, the trend shows that
the profession will struggle to meet market demand. The constricting supply of financial planners in our
profession is making it more challenging for Australians to access financial advice and raise the financial
literacy of the nation. This has been coupled with a significant shift in licensee ownership profiles with the
exit of large institutional ownership over the last 5 years.

Source: Adviser Ratings 2022 Australian Financial Advice Landscape Report – Chart 4.1

3
Weekly Adviser Movement Statistics, Wealth Data, 2 June 2022, https://wealthdata.com.au/adviser-movement-fast-facts/.
Coupling this with the constant regulatory changes and increased costs, recent data indicates that the
cost of producing a financial plan for new clients rose over 15% over the 2020 calendar year4 off the back
of a 10% increase during 20195. Given both general industry trends, and the implementation of the Royal
Commission recommendations since this data was collected, this figure has almost certainly risen
significantly since, putting professional financial advice out of reach of many Australians.
Changing standards and regulations are being applied on top of an already complex regulatory
framework that has evolved over many years. While the FPA has supported, in principle, a number of
these reforms, we believe that the Government of the time gave insufficient consideration to their impact
on the long-term viability of the financial planning profession; an opportunity, however, which is afforded
by this review.
Many in the profession now work as sole traders or in a small or medium-sized practice (irrespective of
licensing). Their capacity to absorb increased costs is extremely limited, particularly given the economic
challenges caused by the COVID-19 pandemic. The ever-changing regulatory environment, conflicting
and duplicative regulatory regimes, and increasing costs has resulted in financial advice becoming more
unaffordable and inaccessible for many Australians at a time when many are recovering from the dual
impacts of the pandemic and rising cost of living.

Source: Adviser Ratings 2022 Australian Financial Advice Landscape Report – Chart 4.2

4
2020 FPA Member Research, CoreData, March 2021.
5
‘The National Opportunity that is Financial Planning’, Dante De Gori CFP, FPA, 3 March 2020, https://fpa.com.au/news/the-
national opportunity-that-is-financial-planning/.
Source: Wealth Data. Licensee Owners based on adviser number. 7 June 2022.

Source: Wealth Data. Licensee by business model and Licensee by size. 7 June 2022.

The numerous factors contributing to increased costs of financial planning include the indirect expenses
of complying with a changing regulatory landscape as well as the direct costs of fees and levies imposed
by the Government on financial planners. Each of these factors affects the affordability and therefore
accessibility of financial advice.
FPA KEY THEMES AND POLICY POSITIONS FOR QUALITY OF
ADVICE REVIEW
The FPA has participated in an ongoing working group of key industry associations regarding the Quality
of Advice Review, including:
1. Association of Financial Advisers (AFA)
2. Chartered Accountants Australia and New Zealand (CAANZ)
3. CPA Australia
4. The Financial Planning Association of Australia (FPA)
5. Financial Services Council (FSC)
6. Financial Services Institute of Australia (FINSIA)
7. Institute of Public Accountants (IPA)
8. Self-Managed Super Fund Association (SMSFA)
9. Stockbrokers and Investment Advisers Association (SIAA)
10. The Advisers Association (TAA)
11. The Boutique Financial Planning Principals Association (BFP)
12. The Licensee Leaders Forum (LLF)
The FPA supports the following key themes this group agreed upon as priorities for improving the
affordability and accessibility of quality financial advice for consumers:
1. Recognising the professionalism of financial planners
2. The client
3. Regulatory certainty
4. Sustainability of profession and practices
5. Open data and innovation
The FPA has recommended priority policy positions the Quality of Advice Review must focus on to embed
these key themes into the regulatory landscape and overcome the affordability and accessibility issues
impacting quality financial advice for consumers.

1. Recognising the professionalism of financial planners

Explanation - what the issue is:
As the history of regulatory reform shows (see Appendix 2), since the introduction of the Financial
Services Reform Act 2001 there have been constant and significant changes to the laws and regulations
applicable to the provision of financial advice. This has led to the regulations of today being an excessive
set of requirements that are expensive to meet, compliance-driven, and difficult to navigate. It is this
regulatory burden that continues to drive up the cost of providing advice. There is significant duplication,
complexity, and gaps that contribute to the accessibility and affordability issues for consumers.
The current financial advice regulatory, consumer protection and affordability issues cannot be fixed by
more band aid solutions.
By transitioning to a simplified regulatory regime that recognises the professional status of financial
advisers and planners – who now require relevant tertiary qualifications, externally administered
examination, individual registration, and 40 hours per year of Continuing Professional Development – we
have the opportunity to significantly reduce the cost of financial advice to consumers, while maintaining
quality and high standards.
Why it is an issue:
History has shown that every regulatory reform has layered additional requirements on top of the existing
obligations, without removing or simplifying how the obligations work together. This view is supported by
the Australian Law Reform Commission (ALRC):
“The architecture of Chapter 7 of the Corporations Act has struggled to adapt to new policy
positions rooted in shifting regulatory philosophies. …...policymakers have rarely been willing to
 undertake the difficult task of reviewing and revising earlier policies and regulatory philosophies.
Instead, new law has been built upon the old. This has been a significant source of legislative
complexity — and one which, under the current legislative architecture, drafters alone can do little
to reduce.
“For example, despite an increasing shift away from disclosure as the foundational regulatory
tool, the vast majority of disclosure-related law remains unchanged. The continuing footprint of
disclosure-related law in the Corporations Act, regulations, and ASIC legislative instruments,
testifies to the reluctance of policymakers to review and simplify the fundamentals of existing
legislation. This is despite disclosure having arguably been displaced or made less central by
more interventionist policies, such as design and distribution obligations, bans on conflicted
remuneration, and product intervention powers. The role of disclosure is ripe for simplification,
both in terms of policy and legislative design. This Background Paper highlights the limits to
legislative simplification that will exist unless there is a readiness to rationalise the policies and
regulatory philosophies underlying the law and update the law and its architecture accordingly.”
“Overall, this Paper underlines the importance of: a clear and consistent legislative hierarchy that
can facilitate reform with minimal complexity; regular review of existing provisions rooted in older
regulatory philosophies; and a recognition that the policy positions of today may not be the policy
positions of tomorrow. Designing a legal architecture that recognises these three elements would
make for simpler and more adaptive financial services legislation.” 6
The introduction of the Financial Planner and Financial Adviser professional standards that apply to the
provision of financial advice as a professional service was a welcome change and long advocated for by
the FPA and our members. However, it is extremely disappointing that these standards are tied to the
historical definition of ‘financial product advice’ in the Corporations Act 2001, and that the existing
obligations for financial advice in the Act were not reviewed when the professional standards were
developed. This has resulted in duplicated requirements in the Corporations Act 2001 applying to the
individual planner, either directly or via obligations placed on the licensee. It has also resulted in the
provision of advice by non-licensed entities that operate outside of ‘financial product advice’, which poses
significant risks to consumers if unabated. As demonstrated in the following schematic, the obligations
placed on financial planners under the Corporations Act 2001 licensee obligations and the Financial
Planners and Advisers Code of Ethics 2019 are heavily influenced by the licensee and others who then
apply additional requirements on planners.

6
Australian Law Reform Commission, Risk and Reform in Australian Financial Services Law (FSL5), 21 March 2022, page 2
This structure and duplication highlight a fundamental flaw of the regulatory framework and the
disconnect between the professional advice service and the regulation of financial advice as a financial
product. This impacts the quality and cost of advice; and consumer understanding, engagement, and
accessibility of a financial plan and the benefit of working with a professional.
The duplication of regulatory requirements has added significant additional costs in providing advice
which are borne by clients. The current licensing system also adds multiple tiers of corporate identities
between the client and the entity legally responsible and licenced for providing the advice under the
Corporations Act 2001, bringing into question the transparency of ownership, conflicts of interest and
influence. While disclosure requirements were introduced to address this issue, the unique and complex
structure and licensing of the financial advice industry is generally not understood by those who do not
work within it.
As an example, this issue drives up the premium of the mandatory professional indemnity insurance
which is a core cost issue for licensees and practices which is ultimately borne by consumers. As detailed
in Appendix 3: FPA submission to ASBEO insurance inquiry, FPA member research on the availability
and affordability of adequate PI cover, showed that for small financial advice licensees, PI insurance
premiums cost approximately 2 to 3 per cent of business revenue on average (with set minimum dollar
amounts in place); and premiums were reviewed annually and in 99 per cent of cases, increased year on
year regardless of the claims history of the business. As noted in the survey results:
• 44% of survey respondents reported premium increases of between 10% and 24%;
• 18% of respondents received increases between 25% and 50%; and
• 15% of respondents experienced an increase of 100% or more. 7
Since this time, more insurers have withdrawn from providing PI cover for financial advice providers in the
Australian market. Most recently AIG which currently accounts for around 20% of premium capacity in the

7
May 2020
market have announced they will leave the market from October 2022, stating a lack of appetite to
continue providing solutions into such an uncertain market. This leaves little time to build capacity and
reduces choice in an already difficult market.
The fundamental issues with the regulation of financial advice can only be overcome by starting with a
‘blank canvas’ and implementing a new regulatory regime that separates financial advice from financial
products, based on a framework of professional standards for individuals requiring the use of professional
judgement and registration as seen in other Australian (and global) professions.
Severing the financial advice professional standards that provide a framework of individual oversight of
professional practitioners, from the historic requirement to be authorised by a licensee, is in line with the
regulatory structure for tax agents under the Tax Agent Services Act 2009.
Maintaining the status quo in addition to the professional standards just adds to the regulatory complexity
(as identified by the ALRC) by building new law upon the old without reviewing or revising earlier policies
and regulatory philosophies. This is the main driver of the affordability and accessibility issues consumers
face when seeking quality financial advice.
Recommendations:
The FPA recommends Treasury, in conjunction with key stakeholders, investigate the potential benefits of
the following changes to the financial advice definitions in the Corporations Act 2001 and the structure of
the financial services law, to improve protections and the quality, affordability and accessibility of advice
for consumers:
a. Remove Chapter 7 from the Corporations Act 2001 to be a standalone Act
b. Restructure the corporations and financial services law as set out in the following box.

Summary of recommendations:

Quick wins Medium term Long term

• Remove Chapter 7 from the • Complete transition for
• Best interest duty – ‘Registered Corporations Act 2001 to be a removal of requirement
relevant providers’ be exempt standalone Financial Planning Act
 from all elements in the Best • Remove the requirement for financial to be authorised by a
Interest Duty in the planners to be authorised by a licensee licensee.
Corporations Act (as this is a in order to provide financial advice to • Recognition and
duplication of the higher retail clients. This should be replaced operation as a
standard best interest by a professional registration and profession.
requirements in the Financial practice certificate. This should be • Solutions to
Planner and Advisers Code of conducted with appropriate transition professional indemnity
Ethics 2019.) arrangements. insurance issues
• Design and Distribution • Investigate solutions to professional successfully
Obligations Act (DDO) - indemnity insurance issues, taking into implemented.
‘Registered relevant providers’ consideration professional standards
be exempt from the and individual registration of
requirements of the Treasury professional financial planners. For
Laws Amendment (Design and example:
Distribution Obligations and o limited liability solution
Product Intervention Powers) o discretional mutual solution.
Act 2019 as it conflicts with the
advice obligations in the
Corporations Act 2001 and the
Financial Planners and
Advisers Code of Ethics 2019.
(See FPA’s response to
question 47 of the issues
paper.)

2. The client
Explanation – what the issue is:
The current financial advice provisions in the Corporations Act 2001 leave gaps in consumer protections
that continue to facilitate the provision of financial advice by individuals offering services outside the
definitions in the law with little or no protections for consumers. Consumers need to be confident that
financial advice is provided by appropriately qualified people. Consumers also need flexibility in the
advice services they can receive, with scalable advice regulation and disclosure obligations that allow the
use of technology and client-led payment options.
Why it is an issue:
Consumers generally do not understand the difference between financial advice that is captured under
the Corporations Act 2001 and the associated consumer protections, and financial advice that falls
outside this regulatory environment.
In practice, the primary service that ‘registered relevant providers’ give to clients is personal financial
planning. This financial planning service includes: the identification of the clients' goals and objectives; the
creation of a financial plan to assist the client with understanding the financial implications of what they
want to achieve in their lives; the recommendation of strategies relevant to the client’s current
circumstances; the recommendation of products to implement (or specifically financial product advice)
those strategies where appropriate; and review services as the client’s life, financial position and
objectives change. This is in line with ASIC’s list of the features of good quality advice in RG175.248 and
through the Financial Planner and Financial Adviser Code of Ethics 2019.
Depending on the client’s circumstances and based on what is in the best interest of the client, the
financial advice may also recommend a class of financial product, or specific financial products and
financial services to achieve the financial goals and objectives of the financial planning strategies. The
professional financial planning service is captured under the Corporations Act 2001 definition of financial
product advice, because of this single relatively minor component and output of the advice – namely the
consideration of financial products or class of product. It is not captured because of the financial planning
advice, that is the primary service provided. In saying this, the FPA does acknowledge that there are
some financial advice providers who only recommend financial products – for example stockbrokers and
superannuation intra-fund advice providers.
In contrast, there are some individuals who provide financial advice to a retail client that does not include
a recommendation about a financial product or class of product (as defined in the Corporations Act 2001).
Areas of advice covering behavioural finance such as fiscal discipline and goal prioritisation, as well as
assistance with government financial services such as Centrelink, aged care or the NDIS fall outside the
regulatory framework. As this service is not captured by the financial product advice definitions, such
individuals do not have to meet the education and training requirements, the standards and values in the
Financial Planners and Advisers Code of Ethics 2019, or the financial product advice obligations under
the Corporations Act 2001. They are not required to act in the best interest of their clients, provide
disclosure documents of any kind to their clients, or eliminate conflicts of interest. This would be akin to
the law stating that the only part of a doctor’s advice that requires qualifications and needs patient
protection is the prescription of medication. Not the acts (or omissions) of taking of blood pressure,
dietary recommendations and lifestyle coaching, referral (or not) to a surgeon, referral to diagnostics, for
example.
As these providers do not have the expense of meeting the complex financial advice regulatory
obligations, they are able to offer cheaper advice. This may appeal to consumers, but it puts those
consumers at significant risk with no legal protections or access to redress for any wrongdoing. The
current system has also led to compliance-focused disclosure outcomes, rather than consumer-focused
advice documentation. Advice documentation that is focused on compliance and meeting legal
obligations significantly diminishes the accessibility of the financial advice for the client. It has resulted in
excessively long and complex documents that in many cases are not read by the client – defeating their
ostensible purpose of disclosure. Our members are currently incurring significant costs in producing
documents that are not read by their clients – driving up the cost of advice while producing no client
benefit.
Under the current disclosure obligations for financial product advice, a provider of personal advice is
required to give a retail client:
• a Financial Services Guide (FSG)
• a Statement of Advice (SOA)
• a Record of Advice (ROA) can be provided to an existing retail client in certain situations, and
• Product disclosure statement/s when a product is recommended.
Current disclosure and consent requirements include:
• Qualification/s to provide the service
• Authorisation and registration on ASIC FAR
• Statement of lack of independence
• Advice engagement arrangement (Financial Planners and Advisers Code of Ethics 2019
Standards 4 and 7)
• Evidence of relevant circumstances, needs and objectives
• Conflicts of interest management
• Fee disclosure statement (FDS)
• Ongoing fee arrangements (OFAs) / opt-in – consent required
• Deducting fees from super / products – consent required
• Platform authority to deduct fees and pay to financial planner/Licensee - consent required
• Privacy – consent required
• AML/CTF ID Verification
• Incomplete or inaccurate information warning
• Time critical warning
• Product replacement disclosure
• General advice warning
• Complaints handling process
• Target market reporting
Additionally, there are a number of licensee-mandated documents such as:
• Authority to proceed
• Risk profile acceptance
• Mandatory minimum alternate strategy comparisons
• Mandatory minimum alternate product comparisons
 • Advice pre-vet
• Advice post-vet
• File audit checklist
As highlighted earlier, the complexity created through the combination of laws, regulators, ombudsmen
and disciplinary systems has led to SOAs which are significantly bloated by licensee-required additions
which attempt to mitigate risk rather than comply with the law.
These obligations apply irrespective of the type, scale or complexity of the financial planning services
being provided.
In comparison, the Financial Conduct Authority (FCA) (UK) has created two types of advisers - Financial
Adviser and Restricted Advisers (including telephone sales) - with tiered Conduct of Business (COB)
disclosure requirements in COB 6, which is similar in many ways to those required in the Corporations Act
2001.
In contrast, most professions simply require a client to understand and agree to the terms of the
engagement (including costs or cost estimates) prior to a service being provided. The professional
service (advice) is then set out in a separate document.
Recommendations:
1. Financial advice definitions
The introduction of the legislated financial advice professional standards and the new product
regulations in the Treasury Laws Amendment (Design and Distribution Obligations and Product
Intervention Powers) Act 2019 created additional consumer protection frameworks to allow a clear
separation of financial advice from financial products.
As a next step, we recommend the terms ‘financial product advice’ and ‘general advice’ should be
removed from the Corporations Act 2001.
In line with the Royal Commission and ALRC recommendations, the FPA recommends the term ‘advice’
only be used in association with ‘personal financial advice’, and ‘general advice’ be changed to ‘financial
product information.’ This new term should be defined as the provision of information only - it should not
permit the provision of an opinion, recommendation or opinion intended to influence the making of a
decision about the product, and where information is provided about a product, it should be restricted to
information on the providers own product, not other products in line with the anti-hawking and design and
distribution obligations. A new strong and clear consumer warning must make it clear to a consumer
when ‘financial product information’ is provided by a product provider’s representative, the product
provider’s interests (not the consumer’s) are being represented, to encourage the consumer to heed the
warning regarding that information.
2. Separate disclosure and advice documentation
The financial advice disclosure and documentation framework should be updated to ensure it is
designed with clients’ best interests at the fore.
To achieve this, we recommend a separation of what is required to be disclosed to the client to meet
regulatory and consumer protection requirements, and the documentation of the financial advice and
implementation strategies and solutions. This will improve the readability of the documentation, and
therefore the client’s understanding of both the financial planner/client arrangement and the financial
advice.
There must be sufficient flexibility in the requirements to allow for the variety of business models providing
financial advice and to meet the needs of clients seeking limited scope advice.
It is also important to ensure that disclosure and advice documentation can be provided in a
technologically neutral manner which best suits the outcome of ensuring that clients understand the
services and recommendations being provided. This is not necessarily in a written document format.
Additionally, the advice document should be outcomes-focused through the development of outcomes-
based regulation, rather than inputs-based regulation which currently leads to the inclusion of information
which is not relevant to ensure clients understand the recommendations being made. Simple advice
should require simple advice documentation whereas complex advice will require as much or as little
information as the client needs to understand the strategy and recommendations being made based on
their level of financial literacy and the risks involved.
3. Education competencies and specialisations
The recommended change to the financial advice definitions in the Corporations Act 2001 (above) will
expand consumer protections to individuals receiving financial advice from individuals who are not
currently required to meet the minimum education standards.
To ensure such services can continue to be provided for the benefit of consumers by appropriately
qualified persons, education standards should be developed based on a framework of scalable
competencies designed around core financial planning competencies and advice specialisations.
As depicted in the schematic below, the FPA recommends the Government adopt a competency
framework for the financial planning profession that recognises both education and experience to
demonstrate competence at AQF7+ level, replacing the existing education framework. This will provide
pathways to demonstrate competence with flexibility of completing study or demonstrating competence,
irrespective of the planner’s years of experience. This will also benefit new entrants who will have more
pathways through which to enter the profession from other careers or financial service education
backgrounds, as well as provide migration competency demonstration pathways for foreign financial
planners who are looking to move to the Australian profession.
This framework should be expanded to also consider appropriate specialist competencies (on top of core
competencies) for providing personal financial advice on tier 1 and tier 2 products, and formal recognition
of professional certifications, designations and specialisations which are not necessarily financial product
linked.
It should be noted that the FPA does not support an experience exemption as consulted on by Treasury
in late 20218, but the schematic does demonstrate an experience pathway with a sunset period of 10
years in the event this model is progressed. The framework would allow experienced financial planners to
demonstrate they are competent to provide advice through a competency assessment framework similar
to those used in the tertiary education sector already for postgraduate qualifications.

Quick wins Medium term Long term

• A single set of rules
Advice definitions Change financial advice definitions
(consistent across
• Strengthen general 1. The removal of the following advice terms and regulators) which are
advice warning - remove definitions from the Corporations Act 2001: easily understood that
the term ‘advice’ and a. Financial product advice govern how to deliver
substitute with ‘product b. General advice financial advice in a
information’ or ‘factual c. Personal advice clear, concise and
information’ – interim step 2. The Corporations Act 2001 to include three terms and engaging way for
only definitions only: clients, and is
a. Financial product information affordable to provide.
Disclosure i. Documents – PDF, TMDs
• Remove overlap of ii. Anti-hawking provisions
information in FSG, PDS, iii. Represents product issuers’ interests
SOA, and ROA iv. Clear consumer warning – it is not advice;
• Permit greater use of describes the financial product or class of product
incorporation by b. Personal financial planning - a client centric
reference professional service (not a product or tied to product)
o PDS/SOA/Service i. Professional standards
agreement, etc. ii. Individual registration obligations
o Working documents iii. Represents client’s interest – advice in the best
interest of client
iv. Appropriate advice disclosure documentation
v. Can incorporate advice on financial product
information if appropriate
c. Factual information
i. Clear consumer warning – it is not advice; factual
information (e.g., how salary sacrificing works)
Remove general advice from product promotion – use of
the term general advice is misleading in this context and
not appropriate
Separation of disclosure information and the actual advice
must permit incorporation by reference:
1. Financial Services Guide (FSG)
2. Service/Engagement Agreement:
• best practice, not compulsory;
• does not repeat any information included in the FSG;
• information scalable depending on scope of advice
required; and,
• to include client consent to cover all consents in one
document and to be accepted by all product
providers.
3. Financial Advice:

8
FPA Submission – Treasury – Financial Adviser Education Standards. https://fpa.com.au/wp-
content/uploads/2022/02/20220201_Treasury_Education-Standard-Proposals_FINAL-1.pdf
 • contains the advice only;
• does not repeat any information included in the FSG
or service/engagement agreement;
• scalable depending on scope of advice required and
professional judgement;
o Including short, quick, appropriate,
affordable advice for the benefit of the
client;
• consent that client understands / agrees to advice /
that advice has been received; and,
• use of technology-based delivery permitted.
4. Detailed advice considerations / working papers to be
kept on file, available on request and use
incorporation by reference in the financial plan if
necessary.
(See FPA’s response to questions 44 to 51 for further
detail)
Adopt education standards based on a framework of
scalable competencies with core competencies and advice
specialisations to support change in advice definitions:
• recognises both education and experience to
demonstrate competence at AQF7+;
• scalable competencies with core competencies and
advice specialisations;
• appropriate specialist competencies for providing
personal financial advice on tier 1 and tier 2 products;
and,
• benefits new entrants and foreign migration.

3. Regulatory certainty – what's achievable short term versus long term

Explanation - what the issue is:
There are many factors that impact regulatory certainty for financial advice providers:
• Regulatory build up – overlaying new laws on top of the existing, as discussed above.
• Duplication – significant duplication of requirements for financial planners required to meet the
education and professional standards including the Code of Ethics, as well as the more
prescriptive and duplicative financial advice requirements in the Corporations Act, as discussed
above:
o registration required on the Financial Adviser Register (FAR) as well as authorisation by
a licensee
o inconsistent education and training standards for ‘registered relevant providers’ and
‘qualified tax relevant providers’
o inconsistent CPD requirements for ‘registered relevant providers’ and ‘qualified tax
relevant providers,’ as well as misalignment of registration CPD requirements and the
licensee CPD year obligations in the law
o applying professional judgement to meet the standards in the Code of Ethics, while still
meeting the prescriptive best interest duty and associated requirements in the
Corporations Act
o confusing conflict of interest obligations in the Code of Ethics and the law
o confusion as to whether the Code permits conflicted remuneration that is allowable under
the Corporations Act
o the conflict between whether advice is able to be scaled between the Code of Ethics
(Standard 6) and s961B of the Corporations Act
o disclosure of the same information to clients multiple times and in multiple documents
 o gaining client consent for client fees and services on numerous occasions (up to eight in
the first year)
o client consent forms for using third party suppliers
o different forms and processes for lodging client consents for each product
o requiring reporting of planners’ own potential breaches, no matter how small, plus those
of other planners and licensees under standard 12 and in s912DAB
o record keeping obligations under both standard 8 and in the law
• Inconsistency of interpretation of the laws – there is a lack of consistency and certainty in how
laws will be interpreted by those who have a significant influence on how financial advice must be
provided, in order to be compliant. Regulators, licensees, the courts and AFCA all interpret the
laws in a slightly different way, resulting in uncertainty over how the laws should be met:
o AFCA and the courts - AFCA’s interpretation of the law and the regulators’ requirements
often vary depending on the circumstances of the complaint being considered. The EDR
scheme’s decisions do not set precedent for future complaints, which results in
inconsistency in the way AFCA may apply the regulatory requirements to a complaint.
Licensees adapt processes, policies and the requirements they place on planners, to
minimise the risk of any AFCA determination against them in the future. This creates
another level of inconsistency in the regulatory environment that sits outside the
provisions in the primary legislation. PI insurers also respond to these AFCA/court
findings.
o FSCP - The new single disciplinary body within ASIC creates further uncertainty as there
is uncertainty as to the methodology and thinking of the FSCP, and level of ASIC
influence over its interpretation of professional standards. Regulatory certainty is needed
to ensure that if the FSCP sets a precedent, it will follow that precedent and not create
different regulatory outcomes on the same issue. From a practical perspective, it is
preferable to have peers sitting in judgement of peers.
o ASIC:
▪ Regulator enforcement over-reach - there is a disconnect between ASIC’s
regulatory guidance and the Regulator’s enforcement action. Licensees have
often tightened their requirements and implemented changes to processes and
systems for financial planners which are not required under the law or in
regulatory guidance because of enforcement action taken by the Regulator. For
example, as detailed in Report 515, ASIC audited and reviewed the financial
advice files of the largest five licensees. As a result of the review, the Regulator
mandated additional training standards that went beyond the requirements in the
law and their own regulatory guidance. There are also examples of ASIC action
taken for a breach of s961B against financial planners even though they had
complied with the best interest duty safe harbour steps as set out in regulatory
guidance. Whether it is within the Regulator’s mandate to impose such conditions
on licensees is not the issue. It is the uncertainty that this enforcement action
creates that is concerning and is having a significant impact on the profession.
Additionally, in many circumstances, ASIC does not publish detailed explanations
of their regulatory enforcement unless it is specifically captured in a report.
▪ Lack of Regulator support – from the perspective of the ‘regulated population’,
ASIC’s regulatory approach differs significantly to that of other regulators relevant
to financial services in Australia. For example, in the 2019/2020 financial year
only $1.324m, or 3 percent of ASIC’s estimated total operating expenditure of
$36.329m (without adjustments) for regulating licensees that provide personal
advice to retail clients on relevant financial products, was spent on industry
engagement, education, guidance and policy advice. Given the positive,
preventative potential of such proactive activity and the importance of and need
for guidance and policy advice particularly to assist smaller licensees, the FPA
suggests the expenditure and activity in these areas appears very low. Feedback
from FPA members also indicates that ASIC will frequently tell planners and
licensees to seek legal advice in response to enquiries seeking clarity on
regulatory guidance that has been issued by the Regulator. This contrasts with
 other regulators which frequently issue both public and private rulings on matters
of regulatory interpretation.
• ‘Scattered’ legislative provisions – provisions related to financial advice are scattered throughout
the Corporations Act 2001 and Corporations Regulations, with changes, exemptions,
clarifications, modifications and interpretations made through legislative instruments, regulatory
guides, information sheets, and media statements. The resources required to keep up to date
with the current and correct obligations are expensive to maintain, and expensive to implement
and given the complexity, can be prone to misinterpretation or transcription errors.
• Regulatory disconnect of new and existing clients - changes to the regulatory environment over
the past decade primarily focus on new clients, often disregarding the unintended consequences
for existing clients. Forcing new obligations designed for new clients onto existing clients has
created significant expense and workload for financial planners with little benefit for the existing
client.
These factors all create a significant amount of complexity and uncertainty for those providing financial
planning services. The more uncertainty, the more the profession - and particularly licensees - feel they
need to cater for all possible regulatory outcomes to ensure they are not subject to enforcement action or
a future complaint.
These factors, and the industry’s response, increase the investment needed in an advice business to
ensure its systems and processes can meet the uncertain requirements, and the time it takes to provide
and document the advice, which drives up the cost of advice for consumers.
Why it is an issue:
Regulatory uncertainty creates significant risk, leading to significant cost, inefficiency, and complexity in
the system. Risk drives up the operational costs for businesses and the time required to provide the
services to the client, such as:
• Licensees mitigate against such real and potential risk by increasing the stringent requirements
and processes financial planners must follow.
• Licensees must also create advice processes and risk mitigation frameworks (I.e., increase
compliance and process) for the lowest common denominator which reduces the efficiency of
professional financial planners to operate in the best interests of clients.
• Increased compliance and process drives up the time and cost of providing services to clients.
• The variation of interpretation means even if one compliance / Regulator / EDR scheme / court /
professional association review finds that the advice process complies with their legal, regulatory,
and professional obligations, the licensee and planner can still be penalised by another limb of
the system.
• It becomes increasingly difficult for financial planners to move between licensees due to the
complexity of how the advice process is designed at a new licensee. This also increases risk for
licensees authorising an experienced financial planner as it takes time and significant monitoring
to ensure the planner complies with the new process. Planners must also write new SoAs for
every client when changing licensee, which is a very significant impost of cost and time even
when the planner, advice, strategies and products recommended, or the client’s circumstances
have not changed. Additionally, unlike other professions, it is nearly impossible where needed to
appoint a locum, to the detriment of clients and the mental health and lives of the planner, when
required due to these issues.
• The number of professional indemnity insurers has recently substantially reduced, tightening the
cover available for financial advice providers and making it extremely difficult to obtain a policy
that meets the mandatory requirements at an affordable price.
• All these risks also require licensees to increase head count or external supplier cost to ensure
they are mitigating as much risk as possible, even though this is impossible due to the complexity
and uncertainty.
Consumers are most impacted by regulatory uncertainty. The intent of the Parliament when it makes laws
is to provide protection to Australians when they receive services from businesses. However, it creates
confusion and frustration for consumers when they are uncertain of the protections that relate to the
service they are seeking – when it is not clear as to the service they are receiving, why the documentation
they are given is lengthy and complex, why they are being asked to sign another disclosure of repeated
information, and whether they have access to redress if they need it. These are accessibility issues.
Regulatory uncertainty continues to drive up the cost of advice and impacts the accessibility of the
services of a financial planner.
Recommendations:
Change is required to resolve the existing regulatory uncertainty. The multiple factors that contribute to
the uncertainty must all be addressed if true regulatory certainty, accessibility and affordability is to be
achieved for the provision of financial advice for consumers.

Quick wins Medium term Long term

• The medium-term • The long-term
• Align CPD year with FAR recommendations detailed recommendations detailed
registration period / renewals or under Key Themes 1 and 2 under Key Themes 1 and 2
with the financial year (i.e., Not above will also assist with above will also assist with
licensee CPD year) improving regulatory certainty improving regulatory certainty
• Make COVID-19 relief for the financial advice for the financial advice
measures permanent: profession. Refer to these profession. Refer to these
o Give planners longer to sections for details. sections for details.
provide written advice to • Remove the need for registered
clients to act quickly when relevant providers to hold a
crisis occurs impacting credit license to provide debt
large number of clients. management advice, Centrelink
o Make use of ROA instead Pension Bonus Top Up advice
of SOA irrespective of (with confidence), and
significance. incidental credit advice.
• Maximise the use of file notes • Provide certainty and clarity
and incorporation by reference. around the Code of Ethics and
• Increase ‘small investment safe harbour requirements to
advice’ no SOA threshold and ensure they allow scalable,
extend to superannuation. affordable advice to clients in a
• Develop a list of simple professional manner.
strategies exempt from
requirement to provide an SOA.
• Align collection of advice fees
from superannuation to all
advice collection obligations.
• Clear direction of law in relation
to life insurance commissions
to ensure certainty for
profession.
• Consolidated client consents:
o Remove duplication
between ongoing fee
consent, renewal notices,
fee disclosure statements
and individual product fee
authorisation forms which
duplicate the same
information and client
acceptance. Allow the
renewal notice / FDS sign
off to be the master copy
for all product providers.
4. Sustainability of profession and practices
Explanation - what the issue is:
The key issues impacting the sustainability of the profession and financial planning practices are the
‘investability’ of financial planning practices, the ongoing substantial drop in financial planner numbers,
and, influencing this, the inequity in the financial advice ecosystem.
The Regulatory Impact Analysis Guide for Ministers’ Meetings and National Standard Setting Bodies
states:
“Regulation is an essential part of running a well-functioning economy and society, but must be
carefully designed so as not to have unintended or distortionary effects, such as imposing
unnecessarily onerous costs on those affected by the regulations or restricting competition.”9
The direct and indirect impacts individuals and households experience from regulation include:
• Higher input costs for goods and services - regulation can increase prices through a range of
effects, such as through stipulations on product design, marketing or distribution.
•
Market intervention - restrictions on competition, market entry or access can have implications for
supply and demand with detrimental impact on prices, choice, quality and availability.
•
Increased compliance effort – the behaviour of regulators, whether in day-to-day dealings with the
public or the design and delivery of services, can impose a range of costs on people who deal
with government.” 10
While these Government guides are produced to assist with the development of regulation, they are
relevant for examining the current regulatory environment for financial advice.
The regulatory environment is the main cost driver for providing financial advice. 11 The factors creating
regulatory uncertainty (discussed above) have escalated over the past decade and now more than ever
place significant pressure on the viability of some financial planning business models. Significant
sustainability issues contributed to the regulatory environment include:
• Supply and demand inequity - The regulatory environment creates unique supply and demand
issues for the financial planning profession, and consumer protection risks for Australians. The
factors that contribute to regulatory uncertainty significantly hinder the ability of ‘registered
relevant providers’ to assist their clients with the financial advice service they are seeking. If
qualified and regulated professionals are not able to meet the demands of Australians,
consumers (who may not understand the difference) look for financial advice from non-relevant
providers and ‘like’ services from unregulated and unqualified individuals allowable due to the gap
in the application of the financial advice regulatory obligations.
As the definitions in the Corporations Act 2001 are tied to the recommendation of financial
products, the obligations in the law do not apply to all individuals offering financial advice to
consumers. Equally, there are exemptions from some requirements afforded to certain types of
financial advice providers. This creates inequity in the financial advice ecosystem, which
diminishes the attractiveness of practicing in and investing in regulated financial planning
businesses.
• Business investment - Regulatory uncertainty drives the need to continuously invest in the
financial planning practice, not for competitive differentiation and improving service delivery, but
to ensure the business and its representatives can meet the requirements in the law and ASIC
guidance and minimise the risk of future enforcement action by the Regulator or a negative
AFCA/court finding should a complaint arise. Those whose service offerings are not captured by
these definitions, have a cost and therefore competitive advantage.

9
May 2021, page 6
10
The Australian Government Guide to Regulatory Impact Analysis, Commonwealth of Australia 2020, page 34
11
The FPA is in the process of conducting a detailed ‘Cost of Advice’ study to collect updated data on the cost of providing advice
for new clients, including a detailed breakdown of the costs of each stage in the advice process. This research will be provided to
the Review in due course.
 There is much talk about the ‘cost of the Statement of Advice (SOA)’. Anecdotal evidence shows
the main cost impacting the preparation of the SOA is the prescriptive input requirements of the
document.12 The amount of background work, information investigation and consideration of the
financial planner that is required to be included in the SOA drives the cost and also reduces the
readability of the document for the client and clouds the actual advice for the client.
• Licensing system - Historically, the oversight of financial advice has been conducted by the
Corporate Regulator leveraging the structure of the licensing regime. The Australian Financial
Services Licensing (AFSL) regime has facilitated significant inequity in the advice market as it
advantages certain business models to the detriment of competition and consumers.
o ASIC Cost Recovery - This issue is very evident in the inequity of the ASIC Cost Recovery
model for financial advice. The FPA supports the cost-recovery of some regulatory expenses.
We believe it is important for the financial services sector to contribute to the cost of
regulating the profession and the broader sector as well as provide adequate protections for
consumers. Industry and consumers benefit from a strong regulatory framework that
promotes public confidence in the sector and encourages Australians to seek advice and
raise their financial literacy.
The Australian Government Cost Recovery Guidelines provide that the Government should
consider a number of factors in deciding how to implement cost-recovery, including the
impact on competition, innovation or the financial viability of those who may need to pay the
costs of regulation.
The FPA welcomed the freezing of ASIC levies charged for personal advice to retail clients at
their 2018/19 level of $1,142 per adviser for two years, and the announcement that the
Treasury will lead a review, in consultation with the Department of Finance and ASIC, on the
ASIC Industry Funding Model to ensure it remains fit for purpose in the longer term. Ever-
changing regulatory regimes and escalating regulatory costs contribute to the increasing cost
of financial advice which in turn makes it less affordable and available for many Australians.
There has been a tendency to apply charges to financial planners for ASIC’s enforcement
activities against unlicensed individuals or entities who are not a member of the profession.
Whilst these individuals have engaged in conduct which has rightfully triggered a significant
response from the regulator and other authorities, it seems incongruous that financial
planners are then required to foot the bill for these actions, given the subjects of the
enforcement are not in fact peers. Whilst these enforcement actions are necessary and
important to ensure wrongdoers are brought to justice and consumers are protected, it is not
equitable for the financial planning profession to be relied on by the Regulator to recoup the
costs for ASIC to pursue those who are not financial planners.
Similarly, the cost of ASIC’s targeted enforcement action for wrongdoing by large licensees,
including oversight of significant high profile and prolonged remediation programs, is also
recovered from the members of the financial planning profession rather than directly from
those entities involved.
As many practitioners are sole traders or work in small and medium-sized practices, their
ability to absorb any additional regulatory costs is extremely limited. To provide certainty to
the profession and provide adequate notice of any change, which may require planning for
business models to adapt, a review should be completed prior to the expiration of the ASIC
levy freeze.
o Penalty Regime - Consideration must also be given to the risk of running a financial advice
business. The penalty regime introduced through the implementation of the Royal
Commission recommendations has created an environment where there are catastrophic
penalties applied for breaches of the law which might be appropriate for large vertically
integrated financial services business, but punitive for the current makeup of the financial

12
The FPA is in the process of conducting a detailed ‘Time in Motion’ study to collect updated data on the cost of providing advice
for new clients, including a detailed breakdown of the costs of each stage in the advice process. This research will be provided to
the Review in due course.
 planning profession. These create a disincentive for, and significant risk for, licensees to
consider efficiencies in their advice process. These are particularly concerning in areas of the
new enhanced FDS regime, record keeping obligations and cybersecurity.
o Professional Indemnity Insurance (PI) – The lack of regulatory oversight of the PI market for
financial planning licensees has had two detrimental impacts. There is a disconnect between
the risks currently present in the profession and the risk assigned through premiums by
insurers due to the lack of engagement by ASIC in the efficient operation of the market.
Secondly, many licensees take out inappropriate policies to reduce cost which creates a
significant consumer protection risk in the event of a complaint, specifically the deductible is
at a level where the financial planning licensee has insufficient capital to compensate
consumers in the event of a claim, whether the policy responds or not.
• Financial planner numbers - Historically, it has been relatively easy to bring new financial
planners into the profession. Education, experience, authorisation and supervision of new
entrants was inappropriately low. As noted in the earlier sections, the introduction of the
Professional Standards Framework has over-corrected this situation, leading to many
experienced financial planners leaving the profession. Additionally, the inflexibility in relation to
education requirements for new entrants is severely limiting the pool of those who are looking to
enter the profession, and the regulatory burdens highlighted make it very difficult for licensees to
spend the time and resources required to undertake professional year supervision. This has led
to the number of relevant providers dropping from over 29,000 in December 2019 to below
17,000 today, with very few new entrants entering the professional year. The changeover from
FASEA to Treasury in administering these requirements has also led to a suspension in data
collection and as a result, little information is currently available on those studying for relevant
qualifications.
• Investibility of the financial planning profession – investment in financial planning is at an all-time
low. Most large licensees who traditionally invested significant amounts of capital into the
profession, compliance and technology have left. Additionally, licensees and practitioners who
remain struggle to afford investments other than those required to meet minimum regulatory
compliance. While Australia was once seen as an attractive market for new financial planning
technology, very little innovation or investment is currently being made. A case in point is that the
SOA is still primarily delivered in paper format despite the improvement and availability of digital
delivery technology becoming commonplace in other professions and industries over the last 10-
15 years. Further, very little academic research is conducted in relation to financial advice due to
the lack of ability to fund research grants. The FPA worked with the academic community for
many years through grants facilitated by larger licensees, however this investment has all but
ceased due to a lack of funding options. This will widen the gap between consumer expectations
and what the profession is able to deliver.
• The significant reduction in financial planners has led to a significant number of formerly advised
clients who are now disconnected from a professional relationship because their financial planner
no longer practices or because it was uneconomical to continue providing them with a service.
Regulation should allow for a range of business models and improve the ability for the profession to
invest in new entrants and efficiencies through innovation, technology and research.
Why it is an issue:
The issues impacting sustainability of the financial planning profession and financial planning practices
directly affect the affordability and accessibility of financial advice for consumers.
As described in the Government guide, regulatory market intervention that restricts competition can have
a detrimental impact on prices, choice, quality and availability for consumers.13
Addressing the factors causing regulatory uncertainty is vital to make financial advice attractive to invest
in professionally and as a business. Ensuring the sustainability of the financial planning profession and
financial planning practices is in the best interests of consumers and over time, future Governments,

13
Page 34
whose need to support a costly social security system (especially the Age Pension) is reduced by
effective savings and retirement advice provided to consumers.
The regulatory environment must be flexible to improve:
• Consumer choice - permit the financial planning profession to provide the advice services
consumers need and want. The regulatory environment for financial advice should be scalable
and allow all financial planners to use professional judgement to meet the advice needs of the
client on a sliding scale/continuum model. It should facilitate the provision of very simple advice
for simple client requests, to more detailed advice in response to complex client requests.
• Advice quality - there are some individuals who provide financial advice to retail clients that does
not include a recommendation about a financial product or class of product as defined in the
Corporations Act 2001. As this service is not captured by the financial product advice definitions,
such individuals do not have to meet education and training requirements, the standards and
values in the Financial Planners and Advisers Code of Ethics 2019, or the financial product
advice obligations under the Corporations Act 2001. They are not required to act in the best
interest of their clients, provide disclosure documents of any kind to their clients, or eliminate
conflicts of interests. This puts consumers at risk of receiving advice that may not be suitable for
their circumstances or prioritise their needs over those of the provider.
• Advice availability and prices - The cost associated with providing limited scope advice is
excessive for the service provided to the client. While the cost of providing holistic advice is still
very high, it is more in line with the level of service the client receives. These costs are driven in
the main by the legal obligations for providing personal financial advice. The FPA’s next step will
be to commission a ‘Cost of Advice’ study, which will investigate the cost effectiveness of
providing limited scope advice versus holistic advice.
The regulatory system must be flexible to stimulate competition and ensure all registered relevant
providers have the ability to provide limited scope advice, regardless of the business model they
operate under, for the benefit of consumers.
The Australian Government Guide to Regulatory Impact Analysis states:
Where your proposal leads to higher regulatory compliance burdens, you need to actively
investigate opportunities to offset these burdens among the affected sector(s). 14
Tax deductibility of initial financial advice fees and additional certainty around the deductibility of ongoing
advice fees would offset a proportion of the price differential between registered relevant providers and
non-relevant providers and unregulated advice providers by reducing the cost of advice for consumers.
All financial advice should have tax deductible status to help make financial advice accessible
and affordable for all Australians. This should be regardless of the stage in the financial advice process
it is provided, and whether it directly relates to the creation of investment income.
Currently, tax treatments of financial advice occur in numerous ways, dependent on the nature of the
advice sought and when it is provided. As an example, the Australian Taxation Office (ATO) has
determined that a fee for service arrangement in the preparation of an initial financial plan, is not tax
deductible. However, ongoing advice fees are treated as tax deductible as they are deemed to have been
incurred in the course of gaining or producing assessable income. This determination is now over 25
years old and is not reflective of the current regulatory environment under which financial advice is
provided.
Treating the creation of an initial financial plan in a different fashion to that of ongoing advice provides a
disincentive for Australians to seek ‘episodic’ financial advice which will assist them to actively plan, save
and secure their financial future. It also acts as a further barrier for Australians who have not previously
sought or received financial advice.

14
Commonwealth of Australia 2020, page 38
Increasing the accessibility and affordability of financial advice for all Australians, particularly for those on
lower incomes, will provide for a more financially competent community, with Australians becoming more
financially literate and better able to support themselves, especially during retirement.
Recommendations:
Change is required to address the inequity in the financial advice ecosystem that is caused by the
regulatory environment.

Quick wins Medium term Long term

• The medium-term
• Tax deductibility of initial and • The long-term
recommendations detailed
ongoing financial advice fees. recommendations detailed
under Key Themes 1, 2 and 3
• Treasury-led review of the above will also assist with under Key Themes 1, 2 and 3
ASIC Industry Funding Model improving the sustainability of above will also assist with
should commence as soon as improving the sustainability of
the profession. Refer to these
possible and conclude prior to sections for details. the profession. Refer to these
the expiration of the freeze on sections for details.
• Improve clarity around the
ASIC levies charged for • Consider ways to encourage
fintech sandbox to improve
personal advice to retail clients. investment in research and
innovation in financial planning
Indexation of the ‘small technology. innovation of the financial
investment advice’ no SOA planning profession.
• Any new levies or funding
threshold and extension to
mechanisms must be
superannuation.
sustainable and operate equally
• Review the professional year and fairly across the sector
framework to ensure it is fit for (e.g. Compensation Scheme of
purpose and encourages a Last Resort).
broader cohort of new entrants
• ASIC regulatory settings and
to consider a career in financial
enforcement should more
planning.
closely align.
• Regulatory impact statements
must be completed for all new
legislation in relation to financial
advice.

5. Open data and innovation

Explanation - what the issue is:
The significant waste in the system that leads to additional cost, time and resource requirements caused
by the combination of laws, regulations, regulators, monitoring and supervision, and complaints handling
is exacerbated by the waste in the system due to the lack of data and innovation in advice delivery. Much
of this waste could be solved through allowing planners to access to up to date, reliable client data which
is available within the financial services ecosystem already.
Financial planners currently must rely on clients to either provide such data on their financial affairs or
give consent for planners to request it from product providers such as a superannuation trustee. This data
is then entered into financial planners’ advice systems, either manually or by data transfer. This creates
an inefficient impost for both clients and financial planners, and a risk of data entry error or cybersecurity
exposure, which impacts the accessibility and affordability of advice for clients. It also limits data
collection to a point in time. The easier it is for clients to engage in the advice process, and with the data
and documentation inputs and outputs, the more accessible financial advice will be for Australians.
Better access to data will allow financial planners to provide better, more efficient advice to clients,
including the ability to proactively trigger services based on clients achieving or falling behind on goals, or
achieving them ahead of time. The cost of accessing data will also go down significantly, allowing advice
to be provided more cost effectively and quickly to the consumer. Access to data will also improve
innovation and alternative advice delivery models focused on technology to better assist those
Australians who are not able to access advice services delivered by an individual professional.
In most cases the data is already available in the system, and the focus should be on making it more
available in a secure and confidential manner for the benefit of clients. This will improve efficiency and
attract and enable clients across all generations to take up timely and cost-effective advice services and
solutions.
Enabling financial planners to access accurate, timely data in a secure manner will significantly improve
the accessibility and affordability of quality financial advice for consumers.
Consumer Data Right (CDR) – The consumer data right offers an excellent opportunity to make clients’
data more freely available and accessible to financial planners providing services to their clients. There
are a number of issues at this point however with the current CDR. Firstly the registration process for
professionals is not easy to find or undertake and there is little functional information on how data is
obtained beyond having to engage third party tools (which increases cyber security risks). Secondly,
there are many financial products which are not yet included within the CDR framework meaning it is only
a part solution at this point. More assistance is required for the profession to implement CDR data feeds
into financial planning technology. This will result in more efficiency, innovation and better service offers
at an affordable price for clients.
ATO and Centrelink agent status - The regulation of government agency arrangements also creates
inequity in the financial advice system and adds to the cost of providing financial advice to Australians.
Clients often turn to their financial planner to help them interact with government agencies such as
Centrelink and the Australian Taxation Office (‘ATO’). Under current arrangements, financial planners can
provide clients with advice on their rights and obligations with these agencies, however, engaging with the
agencies directly on behalf of the client can be difficult or practically impossible.
The ATO allows tax agents to access its online services portal and act on behalf of their clients, but
financial planners are excluded from this arrangement despite operating under the same regulatory
framework with the Tax Practitioners Board. As only one tax agent is able to be registered per person
and, as many people have both an accountant and a financial planner, the portal is not able to recognise
a financial planner as a client’s second tax agent.
Centrelink maintains a Provider Digital Access portal. However, the Centrelink portal has limited
functionality and financial planners often have to conduct business with Centrelink on behalf of their
clients over the phone or at Centrelink offices. This arrangement results in significant delays and
additional costs to clients.
Centrelink and the ATO should develop their online services portals, and direct services centres (such as
call centres) for professionals acting on behalf of consumers, to ensure financial planners, and other
relevant professionals, have access to a full range of functions and can thus act effectively on behalf of
their clients.
Improving online engagement with financial planners would reduce the administrative burden on
Centrelink and the ATO, as consumers would require less assistance from agency staff in completing
their requests and would be operating with professional advice on what they need to provide to, or
request from, those agencies.
Data Standards – There is significant inefficiency in financial services resulting from the absence of
consistent data standards. Not only in terms of usability for consumers, but also in terms of regulating the
entire sector. We have recently seen the benefit of the creation of a data dictionary by ASIC for the
purpose of internal dispute resolution complaints data reporting, and there would be significant
efficiencies created by rolling this approach out more broadly. The lack of universal data standards makes
it inefficient to complete applications, transfer assets and collect information from products to benefit
consumers’ understanding of their financial positions and engagement with the sector more broadly. Most
importantly, benefits like “straight-through processing” become very difficult to implement.
As an example, the implementation of the fee consent authorisation requiring consumers to individually
authorise the payment of financial advice fees from each of their products has been done in an ad hoc
and individual way by product providers. As a result, it has become extremely burdensome for planners to
facilitate client consent as they must know and adhere to the different date, form and signatory
requirements of every provider in the market. On the other hand, the universal acceptance of the
FSC/FPA AML/CTF ID Verification forms has been an example of where consumer engagement with
products has been able to be dealt with more efficiently due to a common standard. Regulated data
standards have become common across many professions, from medical billing through the Medicare
system, the ATO portal access data standards for tax agents, to the lodgment of documents through the
courts in the legal profession. Other examples include single-touch payroll and superstream. These
effective innovations have all required regulator support to help overcome the natural fragmentation that
results from multiple providers (which otherwise facilitates effective competition).
Cyber Security – Another benefit of improving data standards and facilitating secure data transfer is an
improvement in cyber security for consumers. At present there are significant risks that highly sensitive
data is open to interception or hacking due to the ad hoc nature of data collection, storage and transfer
through the financial services sector. However, more specific to financial planning, there are very few
consolidated or useful tools or guidance provided by Government in relation to cyber security laws,
regulations, risks or solutions. While recent ASIC cases have identified that even large and well-
resourced licensees can still have issues with cybersecurity preparedness, there is significant risk with
smaller licensees given the shift in licensing demographics which have occurred over the last 5 years
(with the majority of planners now being licensed by micro and small licensees). Ultimately, good cyber
security practices help to improve consumer trust engaging with the profession and the sector more
broadly.
Why it is an issue:
Australians will benefit from having easy access to all of their financial data when and where they need it,
aligning with the intent of the CDR. At present, lack of access to data creates a significant inefficiency in
advice provision. Some licensees still require client data to be captured in paper-based fact finder
documents, manually transferred into CRM/Modelling systems, transferred to SOA generation systems,
copied to application forms and other systems largely because of the lack of a common data standard.
Solving the data issue will mean that data ceases to be the friction point it currently is in financial planning
- for planners, consumers, and product and solution providers. This will also have the benefit of making
the profession easier to deal with by clients and everyday Australians because standardisation will assist
access to and affordability of advice. It achieves this by improving the quality (though innovative delivery
and goal tracking technology), efficiency (automatic data syncing) and cost of providing advice, given
data collection and use is one of the longer time costs associated with advice delivery. It will also allow
scalability of advice services for the consumer, as scaled pieces of advice from one or multiple advice
providers can be aggregated into a holistic financial plan and position tracking service for the benefit of
the client. Additionally, “straight-through” implementation of all advice services aligns with consumer
expectations of timeliness they should receive from all professional services providers they engage with
today. Finally, a consistent and accessible data standard and easy, secure access to client data will drive
innovation and investment in advice.
Recommendations:

Quick wins Medium term Long term

• Creation of universal financial
• Standardised data collection • Research access to data.
services data standard.
authorities.
• Roll out CDR to all financial • Universal straight-through
• CDR access for planners implementation.
products.
(professional authority and data
• Legislative/Regulatory mandate
feed into advice and product
to use data standards based on
tech).
the CDR.
• (limited) ATO portal/super data
• Centrelink/Aged Care data
API.
upload for financial planners.
• The ATO and Centrelink to
• Improve technology investment
improve their online and phone
incentives for financial advice.
access arrangements to enable
financial planners to act on
 behalf of their clients with
respect to their superannuation
tax obligations and benefits
administered by Centrelink.
• Register of the provider of the
advice to include digital advice
providers.
• Consolidated cyber security
legal and regulatory obligations
with clear obligations for small
businesses (similar to ASIC
financial advice hub but for
cyber security).
FPA RESPONSE TO QOAR ISSUES PAPER QUESTIONS

Framework for Review

Quality of Advice
1. What are the characteristics of quality advice for providers of advice?
2. What are the characteristics of quality advice for consumers?
3. Have previous regulatory changes improved the quality of advice (for example the best
interests duty and the safe harbour (see section 4.2))?
4. What are the factors the Review should consider in deciding whether a measure has increased
the quality of advice?
Advice and the assessment of its quality needs to be considered from two sides:
1. the subjective experience of the consumer. The consumer should have confidence that they are
better off because of the advice.
2. an objective assessment, by peers, of the reasoning used by the adviser at that point in time.
This is the framework used by the FPA using the FPA Code of Professional Practice 15, which includes
ethical standards, practice standards and rules to measure the quality of the advice provided by the
professional financial planner to their client. The Code was developed from the international Code of
Ethics16 and Practice Standards 17 developed by the Financial Planning Standards Board, and the
localised FPA practice standards and rules have been amended over the last 20 years as both the
experience of living the Code, outcomes of conduct investigations, and changes to the law have resulted
in a modernisation.
The FPA’s experience in developing and measuring compliance with the Code has been that regulation
can be either a facilitator or inhibitor of the provision of quality advice. Regulation cannot, of itself,
improve the quality of advice. Regulation can only influence the environment in which advice is provided.
Raising the minimum education standards and mandated ethics training are good measures if
implemented appropriately. Whether the mere existence of these measures will improve the quality of
advice is dependent on how they are interpreted and adopted by regulators, AFCA, licensees, and
financial planners.
For example, the Statement of Advice was introduced as a consumer protection measure and has
become a disclosure document, a compliance document, a financial planning advice document and a
defense against consumer complaints and regulatory investigations. Its purpose has become muddled,
resulting in the need to provide such a lengthy document, that it negatively impacts the client’s advice
experience and potentially their understanding of the advice and the rationale used by the financial
planner to formulate this.
Another example is the best interest duty ‘safe harbour’ steps, which transformed from one method of
demonstrating how the advice was in the best interest of the client and a protection mechanism for the
financial planner, into a mandatory compliance obligation through the enforcement activities of the
regulator.
These are clear examples and side effects of the approach to regulatory reform, previously discussed in
this submission and supported by the ALRC, where historically new measures have layered additional
requirements on top of the existing obligations, without removing or simplifying how the obligations work
together, and resulting in discrepancies between the regulatory intent of the law and enforcement by
regulators and EDR schemes. This approach makes it extremely difficult to assess, with certainty,
whether a particular regulatory measure has impacted the quality of advice.

15
FPA Code of Professional Practice. https://fpa.com.au/wp-content/uploads/2015/09/FPA_CodeofPractice_July2013.pdf
16
FPSB Code of Ethics and Professional Responsibility. https://www.fpsb.org/wp-
content/uploads/2016/01/110000_pub_CodeEthicsProfResp-A4-LR.pdf
17
FPSB Financial Planning Practice Standards. Financial Planning Practice Standards (PDF)
In professions, it is the professionals and peers who establish the framework for quality, not the law. This
is the purpose of the FPA Code of Professional Practice.
Metrics to measure the quality of advice – FPA's primary position
• The FPA and its members believe the quality of financial planning advice has improved with the
evolution of the profession over the past fifty years.
• Evidence of this evolution is the fact that advice today is focussed more on helping clients define their
goals and objectives, create an understanding of their entire financial position, and develop strategies
to achieve goals, rather than on product.
• Advice is also more likely to be provided on a continuum, rather than on an ad hoc basis, to clients of
a financial planning business.
• Financial planners are today appropriately qualified individuals who provide a professional service to
clients under an enforced Code of Ethics. Financial planning is a profession.
• Standard 12 of the Code of Ethics requires professional financial planners to:
o Individually and in cooperation with peers, you must uphold and promote the ethical
standards of the profession and hold each other accountable for the protection of the public
interest.
• In line with standard 12, the entity to judge the quality of advice should be peers - the quality of the
service provided by professionals should be assessed by other professionals.
• Assessment of the quality of advice should be peer review based on professional standards. Clearly
this is not a cost-effective option for measuring the quality of all the advice service provided by around
17,000 professionals to the millions of consumers in Australia, particularly in an environment of
significant regulatory inefficiency described above. However where there are complaints, or a formal
audit obligation is introduced, these should be peer reviewed.
Metrics to measure the quality of advice – FPA's secondary position
• The FPA understands the government is considering developing metrics to measure whether the
quality of advice has improved and continues to improve over time.
• We do not believe a simple metric is possible, given the subjectivity of the client experience and the
nature of advice as it is provided today.
• We would also be extremely concerned about the cost and overall impact of implementing a metric.
To minimise the risk of increasing the cost of advice, any assessment of the quality of advice should;
o use existing professional compliance processes rather than involve an external party
o avoid adding an additional overlay of complexity or additional regulatory or reporting
requirements.
• Any metric used should recognise that financial advice has evolved and is a professional service, so
should consider the advice given and the experience holistically for clients, not the output from a
product point of view.
A measure of quality should meet the following guiding principles:
a) Quality financial planning advice must demonstrate the values and standards of the Legislated
Code of Ethics using sound professional judgement
b) Quality financial advice should at least meet the minimum standards of professional advice
services and must apply to the range of advice services available to, and sought by consumers,
in an objective manner
c) Advice is a process – the quality of the financial planning advice cannot be assessed through a
single Statement of Advice (SOA) alone. Any examination of the quality of the advice must take
into account the complete client file, goals and objectives, experience, and whether the advice
improves the client’s well-being or financial situation, both at the point of provision and over time.
d) The assessment of the quality of the advice should be simple, easy to measure over time,
relevant, cost effective and leverage existing structures.
Metrics for measuring quality of advice

Description Rationale under guiding principles

Measurement Assess the client file (not just the Advice is a process – the quality of the advice cannot be
SOA) for the identified features of assessed through the SOA alone.
advice
Test if the current position strategy will meet needs, goals
and objectives.
Consider the ongoing financial planning advice services
and relationship:
• not just SOA
• progress reports towards goals and objectives
• must keep people on track
• act on changes to client circumstances
The features checklist aims to provide a simple and
consistent objective measure for the quality of the advice,
applicable to all advice.

Delivery method The FPA does not support the • Leverages existing structures and resources
creation of a checklist, but we • Cost effective
suggest a set of principles to • Provides a consistent and ongoing measure over
guide a reviewer on features of time
good quality advice, possibly in • Based on professional standards
the form of a template. If a
checklist should nevertheless be
developed, it should be based on
the features of good quality
advice (below) that would
indicate the likelihood that quality
advice has been provided. The
checklist should be used in the
compliance audit.

Delivery timing Determined by business • Provides a consistent measure to track changes over
time
• Cost effective

Features that will indicate the likelihood of quality advice should include ALL of the following
elements:
1. Features of good quality advice (based on ASIC RG175.248)
a. Clearly defined scope that is appropriate to the subject matter of the advice
b. Investigation of the client’s relevant circumstances
c. Prioritised, specific and measurable goals and objectives
d. Consideration of the impact of the financial advice – e.g. tax, social security and estate
distribution consequences
e. Good communication with client
f. Strategic and/or product recommendations appropriate to the client’s circumstances
g. Financial planner has demonstrated the use of professional judgement
ASIC’s features of good quality advice in RG175.248 is simple and can apply to all advice types
within existing processes to capture data.
2. Advice is compliant – good quality financial advice
a. must be provided in line with the standards and values of the Financial Planners and
Advisers Code of Ethics 2019
 b. must comply with all relevant legal obligations

3. Complaints data / breaches reported to ASIC and the single disciplinary body.
a. Consideration given to provision of quality assessment by a single disciplinary body as
part of the annual registration process (noting that technology solutions/data dictionary
for efficient submission must be established).
As stated above, the method of delivery for any measure of quality must rely on existing processes and
not be outsourced by the regulator. The current issues with the ASIC Cost Recovery model are a clear
example of the impact regulatory costs have on the affordability of advice for consumers.

Cost of Advice
5. What is the average cost of providing comprehensive advice to a new client?
6. What are the cost drivers of providing financial advice?
7. How are these costs apportioned across meeting regulatory requirements, time spent with
clients, staffing costs (including training), fixed costs (e.g. rent), professional indemnity
insurance, software/technology?
8. How much is the cost of meeting the regulatory requirements a result of what the law requires
and how much is a result of the processes and requirements of an AFS licensee,
superannuation trustee, platform operator or ASIC?
9. Which elements of meeting the regulatory requirements contribute most to costs?
10. Have previous reforms by the Government been implemented in a cost-effective way?
The FPA is working with other associations and Coredata to conduct a detailed 'Cost of Advice’ study with
our members and licensees that examines in detail the costs involved in each step of the process of
providing personal financial advice to clients. This study will be provided to Treasury to the Review in due
course.
Broadly, however, as highlighted in the key themes section, there are many factors which have
contributed to the significant increase in costs to provide financial planning services to consumers:
• Many pieces of legislation which lead to duplication; regulatory inefficiency; and a process which
focuses on inputs (which are easy to inadvertently breach given the regulatory complexity) rather
than the output-based regulation which focuses on providing consumers with certainty, practical
solutions, and good quality advice.
• Too many intermediaries between the financial planner (provider) giving financial planning advice
and the consumer including:
o Licensees who set advice standards at a whole of organisation ‘efficiency’ level rather
than a focus on the client/planner relationship.
o Significant differences between regulators’ guidance and the actions of the enforcement
departments.
o Unclear expectations set by regulators in relation to remediation programs that lead them
to continue for excessive periods.
o Differences in interpretation of the law between ASIC, TPB, AFCA, Courts, (across
different types of) product providers and licensees leading to inefficiencies, duplication
and over-compliance.
o Platform/product provider control of implementation and fee collection/disclosure.
o Professional Indemnity Insurer limiting the financial service by not insuring it or making it
expensive to insure
o Preparing a Statement of Advice which was designed in 2000 with the intention to inform
the client in clear, concise, and effective manner information to purchase securities and
products they were recommended, which has now been transformed by legal and
compliance consultants into a document designed to indemnify the licensee.
o Technology which is not fit for purpose and is unable to easily track the progress of
financial planning advice.
 o Product providers who do not permit the client’s financial planner access to the member’s
account despite client authority.
o Regulators and government service providers which do not allow access to the client’s
information despite client authority, especially in relation to superannuation benefits and
contributions and social security benefits.
It is worth highlighting two areas of regulation that do add significantly to administration and time costs to
providing financial advice services to clients. Specifically, fee disclosure statements and advice fee
consent authorisation. While disclosing annually to a client the actual fees that the client has paid to their
financial planner, the collection of this information has caused significant issues since its implementation
in 2013 due to the variety of reporting standards, time frames and information provided by product
providers. This is in contrast to the simplicity of a financial planner disclosing what they have received.
While the difference is subtle, the challenges described have led to significant challenges, for example, if
a fee is paid by the client from a superannuation interest, there may be the ability for the super fund to
apply Reduced Input Tax Credits that reduces the GST paid by the fund. Some funds will apply this when
the fee is paid, some will apply it at the end of the financial year, some will do it on an ad-hoc basis, and
some will not apply the credit (and some funds do a combination of all four). While the planner receives
the same amount, the client can pay a different amount depending on when the credit is applied, and
there is significant administration required by the planner to figure out which situation they are dealing
with.
Similarly, there has been a broad spectrum of implementation of the new Fee Consent Authorisation
framework by products, outside the differences between collecting fees from super and other products.
Some products are requiring their own forms which otherwise collect only the information required in the
legislation/regulation; some will accept forms created by the planner; some will accept their own forms for
one product type but the planner’s for other product types; some require additional information; some
require more frequent authorisation (we are aware of one super fund which requires quarterly
authorisations); some are requiring multiple forms for the same authorisation (i.e., product application
forms and fee collection authorisations); and some are going so far as requiring the SOA to be provided
in addition to authorisations (which require significant redacting to protect the clients’ privacy). The
development of a legislative required standard would significantly improve the operation of this provision
by ensuring consumers provide authority to collect fees, but not be charged for unnecessary
administration caused by the variety of implementation frameworks created by products.
These two examples demonstrate the complexity of the regulatory environment financial planners operate
under for something as simple as disclosing how much the client has paid and getting their permission to
collect it for the coming year.

Technology Solutions
11. Could financial technology (fintech) reduce the cost of providing advice?
• As highlighted above in the FPA key theme of open data, the issue is less the technology at this
point but the access to data and standardisation of technology which unless solved will continue
to lead to cost of advice increasing.
• While there are over 2,000 advice licensees and 6,000 financial service licensees setting their
own technology standards and creating disparate tech stacks, this issue cannot be resolved. The
entire financial services industry would benefit from a level of government mandated
standardisation for the benefit of Australian consumers. Where this standardisation has occurred
there have been significant improvements in services and access to information for consumers,
for example superstream, single touch payroll, digital group certificates, and open banking/CDR.
• In saying this, there has been significant stagnation in the development of and implementation of
technology solutions in financial advice since the initial investment made in technology in the
2000 – 2010 period. This has been caused by the compounding effects of the GFC, FOFA,
Professional Standards and LIF frameworks and Royal Commission implementation which have
required licensees to invest in compliance processes and technology to manage this aspect of
the business, rather than investment in technology to improve client engagement.
 • A case in point is the statement of advice. ASIC has documented in RGs, information sheets and
in direct communication with the profession that there is no requirement to deliver a statement of
advice based on paper as the technology, but very little progress has been made by licensees to
invest in content delivery technology to document the statement of the advice being provided to
clients.
• Additionally, this is another area where there is significant misunderstanding between the
statements that the advice provided to a client should be bespoke to that client (meaning that the
provision of recommendations should be tailored to the individual client to achieve their goals and
objectives), versus the view that documenting the advice must be bespoke. Bespoke
documentation of advice can never be affordably scaled.
• In summary, yes, technology investment and implementation have the potential to significantly
improve the efficiency, cost and engagement in providing advice to consumers, but the profession
needs time, certainty and access to data to allow this potential to be achieved.

12. Are there regulatory impediments to adopting technological solutions to assist in providing
advice?
• Firstly, it is incorrect to suggest financial advice is provided without the benefit of technology.
Technology has been integral to the provision of financial advice since its infancy, and every
financial planning process in the country relies significantly on technology, from use of CRMs,
data recording, modelling, strategy recommendation, product selection, SOA documentation,
record keeping, implementation services and client reporting.
• As highlighted through our response above, there are a variety of reasons, however, which have
led to stagnation of technology and the bigger issue of data isolation which often requires either
significant investment to connect or manual processes to move data through the advice process.
• ASIC, to their credit, have regularly and frequently stated they regulate the law in a technology
neutral manner. Other regulators of financial advice such as AUSTRAC and the OAIC also take
technology neutral approaches to meeting regulatory obligations. On the other hand, the ATO
and Centrelink have made the decision as regulators to limit the ability for clients to share their
data with their trusted professional, which has created a regulatory impediment.
• In contrast though, the entire financial services industry, financial planners in particular who act
as a central repository of client information in relation to their entire financial position, would
benefit from a data standard – such as the CDR – which makes all client data accessible in a live
medium to improve the services they are able to provide clients.

Consumer Demand/Access
13. How should we measure demand for financial advice?
• The FPA does not have a specific solution to propose for measuring demand for financial advice,
although obvious measures could be made by assessing google search queries on financial
planner/adviser; surveying consumers; or working with financial planner matching sites (for
example the FPA’s Find a Planner directory) to understand demand.
• We would note member feedback has indicated there has never been a period where demand for
their professional services has been insufficient for them to meet their capacity to service clients,
but with the well documented reduction in planner numbers, demand has grown more than ever,
and many members are in the unfortunate position of having to turn clients away due to an
inability to service them. This is obviously exacerbated by the constant regulatory changes
required to be implemented and inefficiencies this causes.
• Additionally, there have been a variety of demand assessments undertaken by research houses
which highlight strong and constant demand for financial advice by Australians with the barriers
being consumers uncertainty in how to access professional advice services, cost, and at various
time negative sentiment due to media focus on the small number of bad actors who claim to
provide financial advice.
14. In what circumstances do people need financial advice but might not be seeking it?
• When they are in financial stress. Evidence shows that financial stress causes even more poor
choices, depression and anxiety because they are unable to share their information and get
financial planning advice.

15. What are the barriers to people who need or want financial advice accessing it?
• This has varied over time, however at present it is the lack of capacity within the profession due
to planner numbers, the time required to provide advice, and the minimum cost required to meet
regulatory requirements which prices out many Australians who would otherwise seek advice.
• There are additionally a number of myths in the community about the financial planning
profession which lead to consumers not seeking out professional advice including a lack of
investible assets, lack of clarity around cost, misconceptions around the types of services
provided, an assumption that the bad actors highlighted in media and other forums are the norm
rather than the exception, and many others.

16. How could advice be more accessible?

• The FPA has provided a number of recommendations to improve the efficiency, affordability and
accessibility of advice to Australian consumers throughout this submission. Appendix 1 – FPA
Policy Platform – Affordable Advice, Sustainable Profession - contains a consolidated list of
recommendations which will make advice more accessible to more Australians.

17. Are there circumstances in which advice or certain types of advice could be provided other
than by a financial adviser and, if so, what?
• There is a spectrum of financial advice services Australian consumers need which range from
simple clarification on financial matters to holistic advice on the client’s entire financial position.
This is overlayed by consumer preferences in relation to self-managing their financial position to
fully outsourcing all management where it is economic and affordable to do it.
• Services such as ASIC’s MoneySmart website provide simple, accessible and timely information
to consumers who need this level of education and assistance, but for many consumers, the
interaction between different financial goals and objectives, and their financial assets to
implement the strategies to achieve these goals creates a level of complexity which can only be
serviced by a professional.
• A key issue in providing non-professional level financial planning services is the regulatory
complexity created between the definitions of factual information, general advice, personal
advice, tier 1 and tier 2 products, a separate credit licensing regime and the consumer protections
regime required to protect consumers from financial service providers who seek to illegally profit
from consumer confusion and misunderstanding.
• In summary, Australians would benefit from a spectrum of further financial literacy education from
primary and secondary education levels, through to trusted sources of engaging adult education
on financial concepts and products, to better tools to allow them to manage their financial
position, to where required – affordable, accessible and professional financial planning services
provided by a professional financial planner. To this end, a whole of country/industry strategy is
required rather than the ad hoc solutions provided to consumers by government, regulators, the
industry, the profession and consumer to consumers at present. The FPA would note these sorts
of frameworks are being developed in other sectors such as the National Drought Agreement and
the Emergency Management Australia.
18. Could financial advisers and consumers benefit from advisers using fintech solutions to
assist with compliance and the preparation of advice?
• As noted in questions 11 and 12, financial planners already use significant amounts of technology
solutions. The FPA has developed a number of tools18 to assist financial planners understand the
technology solutions available to improve each part of the advice process through cost and
process efficiencies and improved consumer engagement. Again, as noted, the issue is more the
lack of a data standard, interconnection of fintech solutions and ultimately a lack of resources
(time and money) to implement new technology solutions given the constant stream of regulatory
change experienced by the profession over the last 15 years.

19. What is preventing new entrants into the industry with innovative, digital-first business
models?
• Innovative solutions are regularly being brought to market. However, the regulatory complexity of
four laws, eight regulators, three consumer compensation frameworks and licensing make it
economically challenging to make these solutions quickly scalable and profitable given the size of
the Australian market and lack of investment opportunities provided.
• We would note, that while ASIC provide a regulatory sandbox to allow new entrants (not existing
providers) to test new technologies and service propositions, it is highly restrictive and
unattractive for testing products.
• Additionally, unlike other regulators (for example the ATO providing tax rulings, Social Services
providing social security rulings, AUSTRAC engagement processes) ASIC will not provide
regulated entities with any form of certainty that their processes or services are compliant with the
law and will recommend that the provider seek their own legal advice. Further, it has been known
for ASIC to later use these approaches to take regulatory enforcement activity against providers
who have approached ASIC for guidance/advice/assistance.

Regulatory Framework
Advice Provisions
20. Is there a practical difference between financial advice and financial product advice and
should they be treated in the same way by the regulatory framework?
• From a practical perspective no, there is no difference between financial advice and financial
product advice. Advice is advice. In practice, the primary service provided is financial advice.
• Financial Planning Standards Board Ltd (FPSB) defines financial planning as:
o “A process of developing strategies to help people manage their financial affairs to meet
life goals.”
• Financial planners:
o review all relevant aspects of a client’s situation across a breadth of financial planning
activities, including inter-relationships among often conflicting objectives.
o considers one or more strategies relevant to the client’s current situation that could
reasonably meet the client’s objectives, needs and priorities.
o develops financial planning recommendations based on the selected strategies to
reasonably meet the client’s confirmed objectives, needs and priorities, and
o may identify appropriate product(s) and service(s) to meet the strategies.
• In practice, the service ‘registered relevant providers’ provide clients can include the
recommendation of strategies, products and services depending on the client’s circumstances
and based on what is in the best interests of the client.

18
FPA Fintech Hub – https://fpa.com.au/fintech
 • There is also no difference for a consumer. Consumers do not understand the difference between
financial advice that is captured under the Corporations Act 2001 and the associated consumer
protections, and financial advice that falls outside this regulatory environment.
• The disconnect between the professional service of financial advice and the regulation of advice
as a financial product is a fundamental flaw that impacts the quality, cost and consumer
understanding/engagement/accessibility of advice.
• Financial advice is a professional service that involves:
o assisting clients to understand and articulate their goals and objectives
o recommending strategies in the form of a financial plan so clients can live their best lives,
and importantly keep them on track to achieving them as life throws up a variety of
challenges and opportunities.
o Financial advice may or may not include a recommendation involving a financial product
otherwise regulated under financial services law.
• The existing definition of ‘financial product advice’ is fundamentally flawed as it does not
represent the service that consumers receive from registered relevant providers. This undermines
the consumer protection the law aims to provide.
• Creating different types of advice - financial advice and financial product advice – shows a
significant lack of understanding of the service the client is seeking, the process of financial
advice, the requirements under the legislated Financial Planners and Advisers Code of Ethics
2019, and how consumers receive such advice. It will only serve to further complicate the
regulatory framework and create loopholes in consumer protection.
• The current definitions exclude from the personal advice regulatory obligations common areas of
enquiry by consumers, such as advice on (for example but not limited to):
o budget management/cash flow
o paying down debt
o whether to lend money to family
o property decisions such as purchasing versus renting
o property investment
o whether to renovate or buy a new house
o how to fund children’s education
o social security.
• The provision of ‘personal financial advice’ should not be tied to financial products and must be
provided in the best interest of the client by a qualified professional representing the client’s
interests.
• In practice, financial advice aims to achieve an outcome where clients are educated and
empowers clients to help them make better, more informed financial decisions. To understand
when they have enough to retire, enough to support their kids and enough to meet their goals.
Financial product advice on the other hand is about recommending the right tools to implement
strategies to achieve these goals.
• However, creating an extra definition of financial advice risks complicating the laws further as
many providers, including existing registered relevant providers, would fall into both categories.
• In line with the recommendations from both the Royal Commission and the ALRC Interim Report,
the term ‘advice’ should only apply to the provision of personal financial advice, regardless of
whether a product recommendation has been made.

21. Are there any impediments to a financial adviser providing financial advice more broadly, e.g.
about budgeting, home ownership or Centrelink pensions? If so, what?
• Yes. Cost is the most significant impediment to financial advisers providing advice about
budgeting, home ownership or Centrelink pensions. The regulatory requirements make it
excessively expensive to provide advice on this type of subject matter unless it is part of a
broader financial plan.
• While the current advice definitions in the Corporations Act 2001 do not cover advice about
budgeting, home ownership or Centrelink pensions (as these are not financial products), financial
 advice to retail clients provided by a ‘registered relevant provider’ must meet the requirements of
the Financial Planners and Advisers Code of Ethics 2019.
• Under the legislated Financial Planners and Advisers Code of Ethics 2019 financial planners are
required to take into account the client’s broader, long-term interests and likely future
circumstances and consider whether their advice and recommendations will improve the client’s
financial wellbeing.
• In determining advice strategies in the client’s best interests, a financial planner considers the
client’s existing circumstances including budgeting, home ownership and all income sources such
as eligibility for social security payments. This is routinely completed as part of the financial
planner’s initial fact-finding process and during reviews of the client’s financial plan. Home
ownership and Centrelink benefits are key factors in determining the income and expenditure
circumstances of the client. Budgeting strategies underpin the attainment of the client’s financial
goals.
• The legislated Financial Planners and Advisers Code of Ethics 2019 applies to all advice provided
to a retail client by a ‘registered relevant provider’. The ambiguity in the law, particularly in relation
to Standard 6 of the Financial Planners and Advisers Code of Ethics 2019 and s961B of the
Corporations Act 2001, results in financial planners avoiding the provision of scaled advice on
these topics out of fear of ASIC/licensee/AFCA viewing it as non-compliant.
• Therefore, the provision of advice on these topics by a 'registered relevant provider’ will incur the
same regulatory costs as more comprehensive financial advice that includes a financial product
recommendation, for example.

22. What types of financial advice should be regulated and to what extent?
• The term ‘advice’ should only be associated with the provision of ‘personal financial advice’,
which should be defined as a client centric professional service (not a product).
• The following existing terms and definitions should be removed from the law:
• Financial product advice
o General advice
o Personal advice
• The regulation of ‘personal financial advice’ should include:
o Professional standards
o Individual registration obligations
o Represents client’s interest – advice in the best interests of the client
o Appropriate disclosure and advice documentation
o Can incorporate advice on financial product information if appropriate for the client and in
the client’s best interests
• Only ‘registered relevant providers’ permitted to make financial product recommendations under
the provision of personal financial advice
• All ‘personal financial advice’ to a retail client must be provided by a ‘registered relevant provider’
who is qualified and operates under the Financial Planners and Advisers Code of Ethics 2019,
including:
o Intra-fund financial advice
o Limited / scaled financial advice
o Strategic financial advice
o Financial advice with a product recommendation
o Financial advice on either or both tier 1 and tier 2 products
• ‘Factual information’ should be maintained.
o Clear consumer warning – it is not advice, it is factual information (e.g., how salary
sacrificing works)
• ‘Financial product information’ should be defined in the law. The new term and definition
should be drafted from the consumer’s perspective of the type and intent of the information
being provided and linked to the Treasury Laws Amendment (Design and Distribution
Obligations and Product Intervention Powers) Act 2019. For example:
o Documents – PDS, TMDs
 o Anti-hawking provisions
o Represents product issuers interest
o Clear consumer warning – it is not advice; describes the financial product; the individual
is representing the provider’s interests
• A service provided by a representative of a product manufacturer with the aim of providing
appropriate information about that entity’s financial products so a consumer can make an
informed decision should:
o not be labelled ‘advice’
o be regulated through the Treasury Laws Amendment (Design and Distribution
Obligations and Product Intervention Powers) Act 2019
o comply with the Target Market Determination for the product
o comply with the anti-hawking provisions in the Corporations Act 2001
o not be permitted to be provided with a recommendation or statement of opinion intended
to influence the making of a decision about the product, unless under the provision of
personal financial advice provided by a registered relevant provider
o be restricted in the extent of the assistance provided
o include a clear consumer warning that the assistance offered is restricted to the products
of the product provider and does not include the consideration of the consumer’s financial
circumstances, identify if that product (or type of product) will help meet the consumer's
broader financial goals, or compare the product provider’s products with other products
available on the market
o require informed consent as to the limitations of the service being provided
o recommend personal financial advice be sought by the consumer
o be subject to the IDR / EDR requirements in the Corporations Act 2001

23. Should there be different categories of financial advice and financial product advice and if so
for what purpose?
• No. This will only serve to further complicate the law, confuse consumers, and undermine
consumer protection.
• The financial advice regulations, including the education and training standards, should be
flexible so they can be scaled to the advice specialisation and subject matter sought by
consumers.

24. How should the different categories of advice be labelled?

• The introduction of the financial advice professional standards and the new product regulations in
the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention
Powers) Act 2019 create additional consumer protection frameworks to allow a clear separation
of financial advice from financial products.
• The term ‘financial product advice’ should be removed from the Corporations Act 2001.
• The term ‘advice’ should only be associated with the provision of ‘personal financial advice’,
which should be defined as a client centric professional service (not a product).
• The term ‘general advice’ should be removed from the law.
• ‘Financial product information’ should be defined in the law. The new term and definition should
be drafted from the consumer’s perspective of the type and intent of the information being
provided and linked to the Treasury Laws Amendment (Design and Distribution Obligations and
Product Intervention Powers) Act 2019. A clear consumer warning must be given before the
information is provided.
• While changing the name of ‘general advice’ is a positive step, this is not just about the label but
also the defining of general advice and personal advice in the Corporations Act 2001, the current
general advice warning, and the regulatory exemptions available to product issuers in the
Corporations Regulations.
• Framing ‘general advice’ as advice plays into the behavioural aspects of financial decision-
making by giving the impression that the ‘advice’ has a reasonable basis or is appropriate for the
 client, and thereby exposes retail clients to decisions made under uncertainty about the
regulatory framework for that advice.
• Under the current definitions of personal advice and general advice it is very easy for financial
planners and other AFSL representatives, such as call centre operators, to inadvertently overstep
the mark into personal advice. However, regardless of the legal boundaries of the personal and
general advice definitions, it is the consumers’ interpretation of the advice that ultimately
determines whether they are being provided general product facts or information that relates to
their own circumstances. Anecdotal evidence shows that it is common for individuals to interpret
general advice as personal advice because it is relevant to their circumstances at the time it is
provided.
• Commissioner Hayne seemingly shared the FPA’s concerns about general advice as indicated in
his summation of case study evidence presented at the Royal Commission into Misconduct in the
Banking, Superannuation and Financial Services Industry.1
• Under the current legislative framework there is ‘factual information’, ‘financial product advice’,
‘general advice’ and ‘personal advice’. ‘General advice’ is factual information or opinion which
includes a qualitative judgement about a financial product or a class of financial product that
was intended to influence (or could have reasonably been regarded to have intended to
influence).
• This makes ‘general advice’ confusing for consumers as it is not just a label but is a multi-
faceted scenario dependent on a number of factors including:
o The ‘advice’ provided – is it factual information about a product or the tax
system, marketing material intended solely to sell a product, strategic
information about financial matters, or is it just an opinion?
o Who provides the ‘general advice’ to the consumer – is it an individual
representing the interests of the product issuer, or a financial planner
representing the interests of the consumer, for example?
o The intent behind the provision of the ‘general advice’ – is it information
intended to influence a person to buy a product (ie. the intent is to sell); or
is it to help the consumer make an informed decision provided in the
consumer’s interest?
o The context in which the information is provided – is the ‘general advice’
given in a setting which suggests to the consumer that it will be
appropriate for their personal circumstances?
• Appendix 4 is FPA’s feedback on alternative ‘general advice’ labels previously
proposed by ASIC.2
• ‘Financial product information’ should be defined in the law.
o The definition should be the provision of information only; it should not permit the
provision of an opinion, recommendation or opinion intended to influence.
▪ The Target Market Determinations (TMD) required under the Treasury Laws
Amendment (Design and Distribution Obligations and Product Intervention
Powers) Act 2019 should include clear and sufficient information about the
suitability of the product for individuals with the common circumstances stated in
the target market of the TMD. This could be provided as factual information for
the individual to consider in comparison to their own circumstances.
o The warning for ‘financial product information’ must clearly state that:
▪ it is not ‘advice’, it is material which describes the financial product provided for
the purposes of assisting any person to consider whether to acquire that product
▪ the consumer’s circumstances have not been considered in the
‘financial product information’ provided. The information is
general and ‘non-personalised’ in nature.
▪ the consumer themselves must consider whether the features of
the product provided in the TMD are suitable for their
circumstances, and
▪ the ‘financial product information’ provided is about a complex
financial product and the consumer should consider seeking
professional financial advice provided in their best interest and
 tailored to their individual circumstances by a registered financial
planner to ensure the product meets their needs.

25. Should advice provided to groups of consumers who share some common circumstances or
characteristics of the cohort (such as targeted advertising) be regulated differently from
advice provided only to an individual?
• Yes. Targeted advertising is not advice. It is subjective information produced to entice consumers
to implement a ‘call to action’ desired by the provider of the advertising material.
• Advice provided to an individual or single entity (or like) should be regulated as ‘personal financial
advice’
• Guidance/advice/assistance provided to groups of consumers who share some common
circumstances or characteristics should be regulated as ‘financial product information’. This type
of information commonly uses subjective language to present selected facts in a favourable
manner. Labelling and regulating such information as ‘advice’ is misleading and confusing for
consumers.
• Financial product information is about a product or class of products.

26. How should alternative advice providers, such as financial coaches or influencers, be
regulated, if at all?
• Financial coaches commonly provide personal financial advice to assist clients with managing
their financial affairs including budgeting and cash flow. Budgeting advice, such as where, when
and how to spend money, can have detrimental and long-term effects on an individual’s financial
well-being if it is inappropriate for the person’s circumstances or not in their best interests.
• Financial coaches and influencers should be regulated under the ‘personal financial advice on tier
2 products’ regulations, with suitable requirements that reflect the risk of the advice provided to
ensure all consumers are afforded the same protections.

Type, scope and scale of Advice

27. How does applying and considering the distinction between general and personal advice add
to the cost of providing advice?
• As noted in the FPA’s response to the Cost of Advice section, the FPA and other associations are
currently collecting this information for the Review.
• For financial planners specifically however, this is generally not an issue. Personal advice is
provided directly to an individual client(s); whereas general advice is only used in group
communication formats such as seminars, webinars, newsletters and other forms of media. This
ensures there is no issue with clients misconstruing when advice takes into account their
personal circumstances and when it is intended for a group of consumers.
• This issue has traditionally been more of a problem for product manufacturers as seen through
recent ASIC enforcement activity.

28. Should the scope of intra-fund advice be expanded? If so, in what way?
• As stated by ASIC:
o intra-fund advice refers to limited or scaled personal advice that a superannuation trustee
can provide to a member about their superannuation account without an additional fee
being charged to the individual member. The cost is typically covered by the collective
administration fees paid by all members of the fund.3
• The new Retirement Income Covenant obligations require super fund trustees to formulate,
review regularly, and give effect to a retirement income strategy that sets out the trustee’s plan to
assist its members to achieve and balance three objectives:
o Maximise retirement income,
o Manage risks to the sustainability and stability of retirement income, and
 o Allow some flexible access to retirement savings.
• Both the Covenant and the intra-fund advice model apply to ‘members of the fund’; hence
trustees can give effect to the retirement income strategy by assisting members under the
existing intra-fund advice model. Expanding this advice model is not necessary to enable
superannuation trustees to provide personal advice to ‘members of the fund’ about the fund’s
retirement income products.
• The intra-fund advice model should not be expanded to other financial products or to consumers
who do not hold a superannuation account with the fund. It would be inappropriate to legislate
cross-charging mechanisms to occur across financial products and services more broadly.
• It is appropriate to allow superannuation trustees to apply the intra-fund advice model to
‘members of the fund’ as all working Australians are compelled by law to invest in the
superannuation system.

29. Should superannuation trustees be encouraged or required to provide intra-fund advice to

members?
• As stated by ASIC:
o Generally, intra-fund advice refers to limited or scaled personal advice that a
superannuation trustee can provide to a member about their superannuation account
without an additional fee being charged to the individual member. The cost is typically
covered by the collective administration fees paid by all members of the fund.
o Accordingly, intra-fund advice is not a type of advice. Rather, it refers to the cross-
charging mechanism, which can apply to both general and personal advice.4
• Ideally, superannuation funds should make intra-fund advice available to all members to allow
fund members to choose whether to seek that advice.
• However, the FPA strongly encourages Treasury to consider the cost to members for funds to
offer intra-fund advice, versus the uptake of the advice service by fund members.
• Care should be taken to ensure that mandating trustees providing intra-fund advice does not
create unintended additional costs for the majority of consumers for a service that is used by a
minority of fund members.

30. Are any other changes to the regulatory framework necessary to assist superannuation
trustees to provide intra-fund advice or to more actively engage with their members
particularly in relation to retirement issues?
• It is important to consider this question in the context of the broader regulatory requirements that
apply to superannuation products, including the new Design and Distribution Obligations.
• The new Retirement Income Covenant obligations require super fund trustees to formulate,
review regularly, and give effect to a retirement income strategy that sets out the trustee’s plan to
assist its members to achieve and balance three objectives:
o Maximise retirement income,
o Manage risks to the sustainability and stability of retirement income, and
o Allow some flexible access to retirement savings.
• It is appropriate that trustees must comply with the financial advice requirements, the Treasury
Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act
2019 and the anti-hawking measures:
o Treasury Laws Amendment (Design and Distribution Obligations and Product
Intervention Powers) Act 2019 – supply-side intervention to address poor design and
distribution practices at risk of causing consumer detriment. Superannuation trustees, as
issuers, must make a TMD (for each financial product for which the trustee is required to
prepare a PDS, other than MySuper products, defined benefit interests and interests in
eligible rollover funds which are exempt).
o Anti-hawking measures – to protect consumers from unsolicited contact from product
providers and unsolicited offers of financial products, which often contribute to consumers
purchasing products that do not meet their needs.
 o Financial advice requirements – to ensure advice is provided in the best interests of each
consumer.
• The TMD must clearly describe the class of consumers that comprises the target market for the
product and specify any conditions and restrictions on distribution. To satisfy the appropriateness
requirements, the TMD must include:
o a description of the likely objectives, financial situation and needs of consumers in the
target market,
o a description of the product, including its key attributes, and
o an explanation of why the product, including its key attributes, is likely to be consistent
with the likely objectives, financial situation and needs of consumers in the target market.
• Importantly, ASIC’s Regulatory Guide - Product design and distribution obligations 2020 (RG274)
states the fundamental difference between the product information included in the TMD and
personal advice:
o “The appropriateness requirements are objective requirements. They do not require an
issuer to have knowledge about individual consumers. In contrast, personal advice
involves consideration of an individual consumer’s objectives, financial situation and
needs (i.e. a consumer’s personal circumstances)” (RG274.65, page 26).
• The DDO appropriateness requirements set strong consumer protective requirements on the
development of products and the information required to be disclosed in the TMD. A TMD should
include:
o a description of the likely objectives, financial situation and needs of consumers in the
target market,
o a description of the product, including its key attributes, and
o an explanation of why the product, including its key attributes, is likely to be consistent
with the likely objectives, financial situation and needs of consumers in the target market.
• Hence, a quality and compliant TMD offers key financial product information that can be provided
to consumers without the need for product providers to provide financial advice. That is, the TMD
should include factual financial product information that clearly explains the key considerations for
consumers to identify whether the product may be suitable for their circumstances, including in
relation to retirement products.
• Superannuation funds’ call centre representatives should be able to speak to consumers by
providing financial product information based on the TMD and without the need for ‘providing a
recommendation or statement of opinion intended to influence a person in making a decision in
relation to a particular financial product or class of products’ – that is, financial product advice.
This will ensure the information provided to consumers should meet the best interest obligations
of the DDO.
• Consumers wanting a recommendation, or an opinion should be directed to seek personal
financial advice.
• As the Covenant applies to ‘members of the fund’, trustees can give effect to the retirement
income strategy by assisting members to seek personal financial advice under the existing intra-
fund advice model.

31. To what extent does the provision of intra-fund advice affect competition in the financial
advice market?
• The ability of superannuation funds to provide personal advice to members where the cost of the
advice is shared across the fund membership gives trustees a significant cost advantage in the
advice market.
• As there is no consideration of the client’s broader goals and financial position and
recommendations are limited to the members existing fund interest, there are concerns as to
whether recommendations are always in the best interests of the broader financial plan of the
client.
• Intra-fund advice is a cross-charging mechanism whereby the cost is typically covered by the
collective administration fees paid by all members of the fund with no (or a small) additional fee
being charged to the individual member. Financial planners operate outside this mechanism and
 charge a client directly for the advice services provided. Hence, the fees financial planners
charge clients cannot be subsidised.
• This creates the perception that financial planners are expensive in comparison to the invisible
fee charged by super funds.
• There must be transparency in all financial advice fees, regardless of the type of advice service
offered or the business model under which the advice is provided.

32. Do you think that limited scope advice can be valuable for consumers?
• Yes. Personal financial advice is commonly sought by clients in the lead up to or during a ‘trigger
event’, which can influence a client’s financial attitudes and expectations. Some trigger events
commonly occur at a certain age or life stage, while others may be more regular occurrences or
even external to the client.
Table – Examples of trigger events that influence consumers’ financial attitudes and expectations, and
often result in seeking personal financial advice.

Common trigger A client may:

events
• achieve one or more financial planning goals
(may occur at • have a change in attitude towards financial matters
any age or life • become anxious about their financial affairs – this could be influenced by an external
stage) trigger
• receive a tax refund / bill or bonus,
• receive an inheritance / windfall
• lose their job
• be given a redundancy
• change job and income
• become self-employed – starting or changing their own business
• start a business partnership – starting or changing business with someone else
• divorce or separation from a life partner
• lose their partner
• have a change in dependent
• get a pet
• change lifestyles e.g., hobbies / interests (which may be more expensive)
• have to deal with illness
• plan home renovations
• purchase a holiday house
• travel / holidays
• increase debt

Aged-based 20s to 40s 40s to 50s 50s to 60s 65+

trigger events
Career and family Mid-life Pre-retirement Retirement
builder
• Children’s • Business / • Children getting
• Buying a car education career exit married / buying
• Buying a home • Family health strategy a house
• Getting married care • Employment • Grandchildren
• Starting a • Becoming a payout • Relocating /
career carer of parents • Children move downsizing /
• Having children • Thinking about out of home selling family
• Increased debt future retirement • Children get a home
• Further study job • Considering
• Change in • Paying off aged care
career mortgage needs / moving
• Assisting into aged care
children to
 purchase
property
• Thinking about
future retirement
External / • Investment performance/economy
environmental • Changes in laws that may present new opportunities, cause confusion, or impact the
trigger events existing financial arrangements, such as:
o Financial advice regulations
o Superannuation
o Investment
o Tax
o Retirement income
o Centrelink and social security
o Product disclosure and development (particularly in retirement space)
o Credit
• Media coverage – that may raise questions or concerns for consumers

• Outside of these events it can be challenging for consumers to identify all their financial needs
that may fall outside of their current financial goals and that may be of value to them to consider.
Even with the assistance of a financial planner, clients may struggle to identify medium- and
longer-term financial needs as they may not be able to relate to the issues, trigger events and life
stages that are beyond their current circumstances, interests and goals.
• The cost of providing holistic financial advice that considers the full range of issues that might
apply to a client is substantial. The FPA is in the process of conducting a detailed ‘Cost of Advice’
study to collect updated data on the cost of providing advice for new clients, including a detailed
breakdown of the costs of each stage in the advice process. This research will be provided to the
Review in due course.
• Cost is a major obstacle to many Australians seeking financial advice. In particular, younger
Australians are more likely to seek advice on a limited set of issues - for example, on the
selection of an appropriate superannuation fund as they are starting a career – and would be
prepared to pay a commensurate fee for that advice. Limited scope advice provides a valuable
service to such clients.
• It should be noted for example, one of the challenges of intra-fund advice is that the scope of the
advice is limited to that client’s specific interest in that specific super fund. Where members have
multiple funds, conflicting strategies and conflicting needs outside the super system, the
limitations of intra-fund advice can lead to detrimental consumer outcomes. While it is beneficial
for consumers to have access to cost effective (nil direct cost incurred under the intra-fund
charging model) financial advice in relation to the compulsory superannuation system, there are
many examples of where this has ultimately led to poor consumer outcomes due to the limitations
created by the rules and sole purpose test. Fee transparency is critical to enabling consumers to
make an informed decision about the intra-fund advice they are offered and receive.
• Whether the personal financial advice sought is holistic, intra-fund or limited in scope, the
provider of the advice must:
o be registered on the FAR as a relevant provider, and
o meet the values and standards of the legislated Financial Planners and Advisers Code of
Ethics 2019.
• The regulatory environment must be flexible to permit the financial advice profession to provide
the advice services consumers need.

33. What legislative changes are necessary to facilitate the delivery of limited scope advice?
• The regulatory environment for financial advice is already and should remain scalable to allow the
financial planner to use professional judgement to meet the advice needs of the client on a sliding
 scale/continuum model. It should facilitate the provision of very simple advice for simple client
requests, to more detailed advice in response to complex client requests.
• To this point however, there is a lot of regulatory uncertainty based on things like ASIC Report
515, action taken by the regulator and EDR schemes where inappropriate scoping has been
identified but issues not clearly explained to the profession which has led to assumptions by the
profession that it is not possible to scale advice. Licensees therefore take a conservative risk
approach to allowing the scope of advice to be limited.
• Additionally, as noted above, because advice disclosure has traditionally been provided in a
format which is unscalable and contains significant quantities of information designed to
indemnify the licensee rather than provide advice to the consumer, it is difficult to economically
provide limited scope advice to consumers.
• Whilst the current regulatory environment purportedly allows limited scope advice, the
disproportionate risk involved for even the simplest piece of advice, makes it unsustainable and
unviable to provide. For example:
o Principally, a financial planner charging $5,000 per annum for 100 clients a year,
develops a deep knowledge of their clients and only has a risk point of 100 different
clients to receive their fee. This risk is reduced as the planner can afford to take the time
to know almost everything about a client.
o Whereas a provider who may deal with 1,000 episodic clients charging $500 has 1,000
opportunities a year to "slip up" in a huge compliance regime. The fee of $500 would not
cover the cost of a holistic financial planner getting to know their client.
• Successful models ensure limited scoped advice is only provided to clients with appropriate
financial goals and positions and can demonstrate that clients who are inappropriate for the
service are referred to other services or other financial planning businesses.

34. Other than uncertainty about legal obligations, are there other factors that might encourage
financial advisers to provide comprehensive advice rather than limited scope advice?
• Cost. The cost associated with providing limited scope advice is excessive for the service
provided to the client.
• While the cost of providing holistic advice is still too high, it is more in line with the level of service
the client receives.
• These costs are driven in the main by the legal obligations for providing personal financial advice.
• As recommended in the Key Themes above, the FPA has offered a number of recommendations
which would assist in providing limited advice more economically, for example a quick win would
be indexing the no SOA small investment exemption and extending it to advice on
superannuation.
• Additionally, encouragement could be provided to ASIC to support innovative advice delivery
methods like the Video SOA to significantly reduce the cost of producing advice which would
make limited scope advice more economically viable.
• The FPA’s ‘Time and Motion’ study will demonstrate the cost effectiveness of providing limited
scope advice versus holistic advice.

Digital Advice
35. Do you agree that digital advice can make financial advice more accessible and affordable?
• Firstly, there needs to be a definition of what digital advice is referring to. There are three broad
concepts which could be considered “digital” advice.
o Firstly – there is what is generally thought of as “digital advice” which could otherwise be
referred to as robo-advice. In reality, there is no robot and there is no advice. These tools
 are automated product selection tools which run a client through a series of questions
which will automatically make a product selection for the client. For clients who just want
simple quick help selecting the right product, these tools provide an excellent service. But
they don’t provide advice in that the algorithms don’t understand client’s goals and
objectives and assist the client to tradeoff between different goals to improve their
financial position.
o Secondly – there are digital tools which make the collection of data, analysis of
strategies, selection of products, and documentation of disclosure obligations more
efficient for financial planners through data feeds, calculators, databases and templates.
These allow the creation of advice to take advantage of the efficiencies provided by
automations and a single source of truth for data.
o Thirdly – there is the digital delivery of advice to the client. Traditionally advice has
ultimately been delivered to a client on paper-based technology (even if delivered as a
PDF or word document as examples). In contrast, advice (the SOA) can be delivered in
interactive documents with embedded charts, infographics, audio, video and interactive
elements; in formats that range from paper-style, to presentation style, to web page style,
to apps, to videos and (at this point) to an extreme in virtual reality experiences; and
advice can finally be provided as a single point in time document, as an accumulation of
advice over time, or as a live document which updates through data feeds and the clients
changing goals and financial position over time.
• Secondly – while available for many years, there was also a marked shift in the process for
engaging with the client during COVID-19 pandemic, namely the use of video, virtual and
asynchronous meetings tools, rather than the traditional face-to-face (or at the extreme –
telephone based) meetings undertaken by financial planners with their clients (i.e., digital advice
meetings). This has opened up the ability for both clients and financial planners to move away
from the previous geographical limitations that most financial advice practices previously
operated under and therefore made advice more accessible and affordable to provide.
• In short, all of these three definitions of digital advice and additional digital meeting channels can
significantly improve the accessibility and affordability of advice to clients, but more importantly
improve the efficiency and engagement of the advice being provided. All of these are currently
open to be used by financial planners under the current regulatory environment. Feedback from
FPA members is that generally licensees are unwilling to allow their authorised representatives
use alternate advice delivery methods, despite being legally allowable, because it doesn’t fit in
with their existing monitoring, supervision and compliance rules. This has significantly limited the
uptake of “digital advice” (irrespective of which type you look at) to improve the accessibility and
affordability of advice delivery.
• In noting this, there are still significant issues as highlighted above with the accessibility of data
and the ability of digital systems to move data between them. It has also been difficult to invest in
this kind of technology when most licensees are struggling to keep up with the regulatory change
which has occurred over the last 5 years as the accessibility of new technology solutions and
platforms have developed to the point where they could be mass implemented.

36. Are there any types of advice that might be better suited to digital advice than other types of
advice, for example limited scope advice about specific topics?
• As noted above, there are a number of definitions for “digital advice” which could be used. For
example, automated product selection tools are clearly better suited to consumers who are
looking to make decisions on a single or limited number of investment decisions and will benefit
from automated saving/contribution plans in a set and forget manner.
• On the other hand, when considering adult learning preferences 19 (visual [~65%], auditory
[~30%], kinesthetic [~5%], auditory digital [1-2%]), only one learning style - auditory digital - has a
preference to the way SOAs are traditionally delivered and makes up the smallest percentage of
the population.

19
FPA. The Future of the SOA – The four main internal learning systems. https://fpa.com.au/the-future-of-the-soa-the-four-main-
internal-learning-systems/
 • One clear preference consumers have is to be able to easily see how their finances are
positioned when and where required. This significantly reduces a consumer’s propensity to worry
about their financial position. This is seen through the shift to provide consumers with “app
based” access to internet banking and other financial investments. From this perspective, clients
will benefit from an aggregated view of their financial position which their financial planner is in
the ideal position to provide, particularly given this can be tracked against their goal achievement
in an engaging and interactive manner.
• In terms of delivering SOAs, it needs to be understood what the benefit of an SOA is for the
consumer. FPA research shows that consumers are primarily looking to reduce the information
asymmetry20 between their financial planner as a professional and they as the consumer of the
advice service, and therefore have a preference to delivery methods which enhance their
understanding and learning style preference, for example videos21.
• In summary, all advice types will benefit from a move to digital first delivery as this is a more
engaging, efficient and cost-effective way for advice to be delivered, is easier for clients to
understand, and benefits from live data feeds which can show consumers how their financial
position is tracking to their goals over time.

37. Are the risks for consumers different when they receive digital advice and when they receive it
from a financial adviser?
• Taking this question to define “digital advice” as automated product selection tools, it depends on
the construction of the tool. In a like-for-like scenario, the benefit of a professional financial
planner providing advice services under the Financial Planners and Advisers Code of Ethics 2019
is that where a financial product is inappropriate or not in the best interests of the client to
purchase, a professional financial planner will decline to provide advice or make alternative
recommendations (be it strategies or products). Where a consumer has self-selected a product
with an automated product selection tool, the quality of the tool will determine if it includes tests to
recommend the client consider other strategies or products.
• To answer the question more broadly, a more engaging and informative advice delivery
methodology which better assists the client understand their goals (including tradeoffs), financial
position and the recommendations being provided, by providing content in their preferred learning
style is going to reduce the risk for the consumer irrespective of who is providing the
recommendations or the complexity of the advice being provided, because the client will always
be in a better position to understand both the benefits and risks of the recommendations being
provided.

38. Should different forms of advice be regulated differently, e.g., advice provided by a digital
advice tool from advice provided by a financial adviser?
• No, there must be a technology neutral, provider agnostic, human or digital, regulatory
environment under which advice is provided. Human financial planners have been relying on
digital tools to assist in the provision of financial advice for over 20 years, be it spreadsheet-
based modelling tools or SOA templates, to the more sophisticated algorithmic based tools
available today to assist in advice delivery. From this perspective, both digital advice tools and
humans must comply with the same professional obligations (in terms of the natural person
responsible for the development and delivery of the advice be it a “programmer” or a professional
financial planner) and the same obligation to ensure the algorithms or calculators are working and
complying with all legal (advice provision and [financial products] technical) and regulatory rules
and obligations. This is to ensure clients receive the same level of consumer protection
irrespective of who is providing the services. The potential for conflicts and inappropriate advice
provision remains, irrespective of whether the advice is provided by a human, a calculator or an
algorithm.

20
FPA. The Future of the SOA – Initial client feedback. https://fpa.com.au/the-future-of-the-soa-initial-client-feedback/
21
FPA. FPA SOAP Box Set – The Consumer View. https://youtu.be/3X-YpS9AQeU
39. Are you concerned that the quality of advice might be compromised by digital advice?
• Again, it depends on the definition of digital advice provision being used. Broadly no, advice
should be and can be of good quality irrespective of the provider or technology used to provide
advice. There are some concerns (and clear examples) however, specifically in relation to
automated product selection tools that there are no, or inappropriate mechanisms in place to
decline to provide advice where the automated recommendations are not in the best interests of,
or appropriate for the client. Because the client has generally self-selected the tool, there is little
to stop the tool from always recommending a product, or that the recommended product may not
actually be appropriate for the client due to the lack of robust information collection and
goal/tradeoff considerations. Particularly in scenarios where the product will only get paid for the
advice being provided through the investment of funds.

40. Are any changes to the regulatory framework necessary to facilitate digital advice?
• In and of itself, no, there must be a technology neutral, provider agnostic, human or digital,
regulatory environment under which advice is provided. Any changes required to better facilitate
financial planning by a human would be of benefit to providing digital advice as well.
• In saying this, the FPA has previously expressed concern with the “regulatory sandbox” from both
a product/advice development environment and from a consumer protection perspective and
recommended significant improvements in this space. Additionally, as noted above, the lack of
ASIC assistance and rulings makes it difficult and adds risk to the development of novel service
delivery propositions. A more open and facilitative ASIC would broadly benefit the financial
services industry, as well as the financial planning profession specifically.

41. If technology is part of the solution to making advice more accessible, who should be
responsible for the advice provided (for example, an AFS licensee)?
• Yes, as highlighted in previous answers to this section.
• All advice provision should be the responsibility of an individual who meets the professional
standards requirements and is a relevant provider irrespective of whether the advice is provided
fully by a human, combined human and digital advice delivery, or fully through technology. The
FPA has recommended that ASIC update RG105 to ensure that a registered, qualified relevant
provider is responsible manager for all advice authorised AFSLs.
• Further, the FPA would point to both research which has demonstrated that clients have a
preference for talking through their financial decisions and build better trust in their decisions with
a professional financial planners’ involvement22; and the relatively low take up of “robo-advice”
even in mature, regulation lite robo-advice markets like the USA. US data shows consumers have
entrusted under 3% of investible US assets with an average account balance of under US$2,500
to be “managed by” robo-advice services despite 10 years of hype and investment which
indicates a low preference for this type of advice provision by consumers.

42. In what ways can digital advice complement human-provided advice and when should it be a
substitute?
• All financial advice in Australia is complemented by technology already. Technology is used from
everything from the CRM, to collection of information, to modelling and strategy development, to
product selection, to SOA production and delivery, to client agreement, to implementation and

22
Vanguard. Quantifying the investor’s view on the value of human and robo-advice.
https://advisors.vanguard.com/iwe/pdf/ISGHVD.pdf
 finally reviews. There is, however, poor technology integration and automation due to a lack of
investment and data standards across financial services more broadly.
• Where consumers prefer algorithmic delivery of advice without the engagement of a human, they
should have access to this with the comfort that they are protected in the same way and advised
in the same way as they would be by a human. As noted in previous responses however, there is
little consumer demand for algorithmic delivery of advice and a preference to switch to human
engagement with all but simple investment decisions.

Best Interest Duty

• The FPA is concerned that the issues paper poses questions in relation to the best interest duty
obligations in the Corporations Act 2001 and any impact on the quality of advice yet fails to
consider the role and duplication of these provisions with the obligations individual financial
planners must adhere to under the Financial Planners and Advisers Code of Ethics 2019 (the
Code).
• It is the individual financial planner practitioner that interacts with the client, holds a personal
relationship with the client, and delivers the advice service to the individual client. That financial
planner practitioner must use their professional judgement to meet the values and standards in
the Code.
• Licensees put in place the behind-the-scenes processes to enable planners to meet the Code’s
requirements. Licensees do not have a personal relationship with the individual.
• The issues paper focuses on the provisions in the Corporations Act 2001 that apply to the
licensee.

43. Do you consider that the statutory safe harbour for the best interests duty provides any
benefit to consumers or advisers and would there be any prejudice to either of them if it was
removed?
• Registered relevant providers must meet the Financial Planners and Advisers Code of Ethics
2019, which includes best interest standards that go further than the obligations in the
Corporations Act 2001. Financial planners must use their professional judgement to ensure the
client-planner conversations enable the planner to provide financial advice in the best interest of
their client, in its totality, puts the client in a better position overall.
• Financial advice providers who are not relevant providers are not subject to the Financial
Planners and Advisers Code of Ethics 2019. The safe harbour steps offer some additional
consumer protection for clients of non-relevant providers.
• The FPA recommends:
o ‘registered relevant providers’ be exempt from the safe harbour steps in the Corporations
Act 2001 as they must instead comply with the higher standards in the Financial Planners
and Advisers Code of Ethics 2019 (the Code of Ethics);
o non-relevant providers should also be required to comply with the Code of Ethics
o however if the law is not changed to oblige non-relevant providers to be required to
comply with the Code of Ethics, the safe harbour steps should be maintained and non-
relevant providers should be required to comply with these provisions.

44. If at all, how does complying with the safe harbour add to the cost of advice and to what
extent?
• The safe harbour in the Corporations Act 2001 creates a series of compliance type steps that the
licensee must ensure its representatives adhere to when providing personal advice to clients.
• Licensee’s compliance processes and systems are designed to show the advice provided on their
behalf adheres to these obligations in the law.
• However, the standards in the Financial Planners and Advisers Code of Ethics 2019 (Code of
Ethics) apply directly to the individual financial planner practitioner and their services and
professional interactions with each client. Planners are to use professional judgement to meet the
 standards in the Code of Ethics. The Code of Ethics is an overarching requirement intended to go
above and beyond the law.
• This creates a duplication of all the best interest obligations (including the best interests duty,
appropriate advice obligation and the conflicts priority rule) for financial planners.
• The compliance-driven regulation placed on the licensee and professional judgement permission
the Code bestows on the financial planner creates tension and confusion in the regulatory
environment that impacts the cost of demonstrating adherence to the best interest obligations.
• The best interest duty and safe harbour steps in the Corporations Act 2001 should not apply to
registered relevant providers who must instead comply with the Financial Planners and Advisers
Code of Ethics 2019 (the Code).

45. If the safe harbour was removed, what would change about how you would provide personal
advice or how you would require your representatives to provide personal advice?
• Removing the safe harbour obligations for financial planners providing personal financial advice
to retail clients would allow them to apply their professional judgement in the best interests of
their client, as required under the Financial Planners and Advisers Code of Ethics 2019.
• It would remove the tension between the Act and the Code and clearly give financial planners
legal permission to use their professional judgement in meeting the standards of the Code.
• However, licensees would also need to change their approach to planner oversight and remove
compliance-based advice policies and procedures imposed on planners to meet the safe harbour
steps, to be replaced with a professionalism approach based on financial planner professional
judgement.
• Removing the tensions between the Corporations Act 2001 and the Financial Planners and
Advisers Code of Ethics 2019, and licensee compliance-based policies and the use of
professional judgement, would reduce one element of the financial advice regulatory duplication
and improve the accessibility and affordability of advice for consumers.

46. To what extent can the best interests obligations (including the best interests duty,
appropriate advice obligation and the conflicts priority rule) be streamlined to remove
duplication?
• The standards in the Financial Planners and Advisers Code of Ethics 2019 encapsulate and go
further than the best interest obligations in the Corporations Act 2001:

Corporations Act 2001 Financial Planners and Advisers Code of Ethics 2019

s961B Provider must act in Standard 2:

the best interests of the
You must act with integrity and in the best interests of each of your
client
clients.

s961G Resulting advice Standard 5:

must be appropriate to the
All advice and financial product recommendations that you give to a client
client
must be in the best interests of the client and appropriate to the client’s
individual circumstances.
You must be satisfied that the client understands your advice, and the
benefits, costs and risks of the financial products that you recommend,
and you must have reasonable grounds to be satisfied.

s961J Provider to give Standard 3:

priority to the client's
You must not advise, refer or act in any other manner where you have a
interests
conflict of interest or duty.
 • This creates a duplication in the best interest obligations that apply to 'registered relevant
providers’ via the licensing regime and directly to the individual practitioner under the Financial
Planners and Advisers Code of Ethics 2019.
• The Corporations Act 2001 should be amended to specifically include a provision that achieves
the following intent:
o a ‘registered relevant provider’ satisfies the duty in s961B, s961G and s961J as the
relevant provider is required to meet the professional obligations in the Financial
Planners and Advisers Code of Ethics 2019.

47. Do you consider that financial advisers should be required to consider the target market
determination for a financial product before providing personal advice about the product?
• No. The FPA opposes applying the Design and Distribution Obligations (DDO) to financial
planners as it ignores the higher standards of the financial advice regime and brings into question
whether the DDO regime is fit-for-purpose.
• The application of the DDOs to financial planners ignores the requirement that planners must
ensure their advice is appropriate for the client. This is a higher standard than the aim that
products are ‘likely to be’ appropriate for consumers as set in the DDO.
• The DDO regime looks at consumers from the product perspective and the potential risk/harm
posed to retail clients, as identified under the TMD, as a whole.
• In contrast, when providing personal advice, financial planners consider the appropriateness of
each product recommendation in relation to that client’s circumstances and as one part of that
client’s broader financial plan. The best interest obligations in the Corporations Act 2001 and the
standards of the Financial Planners and Advisers Code of Ethics 2019 (Code of Ethics), oblige
financial planners to undertake significant product research and comparisons to determine
whether a financial product is appropriate for that client’s circumstances. Under the Code of
Ethics, the product must be suitable for the role it will play in the financial plan to achieve the
client’s immediate and longer-term goals and likely future interests. These obligations also require
planners to clearly demonstrate that the client would be in a better financial position and that it
would improve the client’s financial well-being if the advice were followed. This will be different for
each client of the financial planner.
• If the planner has recommended the product through the provision of quality personal advice in
the best interest of their client, the planner has considered all risks of the product in relation to the
individual client’s circumstances and determined that the product is appropriate.
• ASIC’s statistics show only 20 per cent of consumers seek personal financial advice. This means
approximately 80 per cent of consumers access financial products via direct distribution channels.
The requirement to monitor and assess the ongoing appropriateness of the target market
determination was placed on product providers in the legislation to ensure consumers who are
not protected by the personal financial advice best interest duty and the Code of Ethics, are
monitored against the risk of harm from financial products.
• Sections 994B(5)(h), 994F(5), and s994F(3)(c) of the Treasury Laws Amendment (Design and
Distribution Obligations and Product Intervention Powers) Act 2019 create a loophole for product
providers to obviate some of their product design and distribution responsibilities by allowing
them to pass these obligations on to planners who service only 20 per cent of consumers,
undermining the role of the new laws and putting consumers at risk of continued harm.
• This is also contradictory to the law as regulated entities who provide personal financial advice
are exempt under the Treasury Laws Amendment (Design and Distribution Obligations and
Product Intervention Powers) Act 2019 from the requirement to be consistent with the target
market determination when distributing financial products. Financial planners are expected to
report against TMDs, even though they are obliged under the Corporations Act 2001 to meet their
best interest obligations for each client, rather than meet the target market determination features
indicated by the product provider.
• The DDO obligations ignore the legal requirements for financial planners to ensure the advice
they provide including any product recommendations they make, are appropriate to meet their
client’s objectives, financial situation and needs, taking into account the client’s broader, long-
 term interests and likely future circumstances. Rather, it places the product providers TMD above
these professional and licensing requirements by imposing additional requirements on planners
to have in place systems to compare their recommendations to TMDs and report any
inconsistencies.
• ‘Registered relevant providers’ should be exempt from the requirements of the DDO as it conflicts
with the advice obligations in the Corporations Act 2001 and the Financial Planners and Advisers
Code of Ethics 2019.
• The FPA opposes mandating that financial planners be required to consider the TMD for a
financial product before providing personal advice about the product. TMDs are one of many
sources of product information which may be considered as part of the financial planner’s product
research and due diligence.

Remuneration
48. To what extent has the ban on conflicted remuneration assisted in aligning adviser and
consumer interests?
• The FPA had been calling on a ban on conflicted remuneration since the implementation of the
FPA Remuneration Policy in 2009 because of the inherent conflicts created by financial advice
providers being remunerated by products for distribution rather than for providing financial
planning services in the best interests of the client.
• It is clear from both ASIC and AFCA data that the bans on conflicted remuneration and
professional standards framework have significantly improved the conduct of financial planners.
Both have publicly stated that there has been a change in the types of complaints and
compliance concerns from general misconduct related to inappropriate advice, to issues more
related with failure to meet the clients’ services expectations (AFCA) and serious and deliberate
misconduct (ASIC).

49. Has the ban contributed towards improving the quality of advice?
• Yes, as noted, both ASIC and AFCA have publicly stated and stated to Parliament that there has
been an improvement in the quality of advice which has been contributed to by both FOFA and
the Professional Standards framework.

50. Has the ban affected other outcomes in the financial advice industry, such as the profitability
of advice firms, the structure of advice firms and the cost of providing advice?
• On a case-by-case basis, the ban has a significant effect on some financial planning practices.
The FPA has data from members showing that at the time of the ban some practices still had the
majority of their remuneration coming from commissions on investment products. But overall,
FPA members only had limited conflicted remuneration left when it was fully removed at the end
of 2020.
• The FPA on an annual basis surveyed members' 23 proportions of revenue from various sources
with the following results – with particular relevance being “commissions from non-risk
recommendations”:

Revenue Type 2013 2014 2015 2016 2017 2018 2019 2020

other 1 3 4 1 2 5.1 3.6 7

fee for service hourly 4 5 8 5 7 6 5.9 15

23
FPA Member Satisfaction Research 2013-2020
 fee for service fixed 19 38 42 38 38 36.8 44.5 34

fee for service asset based 20 30 24 28 26 25.8 22.7 32

commissions from risk/insurance 39 19 17 18 17 18.3 16.4 5

recommendations

commissions from non-risk 17 5 6 10 10 8.3 7 0

recommendations

51. What would be the implications for consumers if the exemptions from the ban on conflicted
remuneration were removed, including on the quality of financial advice and the affordability
and accessibility of advice? Please indicate which exemption you are referring to in providing
your feedback.
• The FPA supports the removal of all exemptions other than in relation to life insurance
commissions.
• In relation to life insurance specifically, Australians want financial advice to help them when they
select life, total permanent disability and income protection insurance. These products involve
complicated application processes, have complicated contractual terms, complicated and varied
tax treatment (both in relation to premiums and benefits) and Australian’s generally have little
understanding of how to calculate an appropriate level of cover, particularly when cashflow may
be impacted. However, the cost of this advice is often an obstacle and insurance advice is often
most needed at a time of life in which people do not have excess cash flow with which to pay for
it.
• The Life Insurance Framework (LIF) provides an opportunity for consumers to pay for financial
advice indirectly, through commissions paid to financial planners by insurers. Many Australians
would not be able to afford to pay for financial advice on insurance by paying an upfront fee and
LIF commissions provide the only option for these consumers to access financial advice.
• As upfront and trail commission rates are closely regulated under the LIF, commissions no longer
provide an incentive for a financial planner to recommend one insurance policy over another, and
the combination of claw backs, the Financial Planners and Advisers Code of Ethics 2019, best
interest duty and conduct oversight by the Financial Services and Credit Panel at ASIC provide
considerable consumer protection benefits from inappropriate insurance policy sales. These
measures have collectively deincentivised inappropriate cover recommendations and churning of
policies and improved life cover outcomes for clients of financial planners as demonstrated by
improvements in EDR claims through AFCA, conduct investigations by ASIC and the outcomes of
 ASIC’s review of life insurance advice and the few instances of regulatory enforcement taken off
the back of this review.
• Importantly, the Life Insurance Framework has allowed consumers to choose how to pay for their
life insurance advice in a manner which provides them with choice and flexibility and the
professional standards framework has ensured there is clear disclosure and client acceptance of
remuneration model.
• While the FPA believes Life insurance companies should provide consumers with flexibility in how
financial advice is paid for by creating new fee collection options and new products that offer
transparent and commission-free options, as highlighted below in our response to Question 53,
there are significant issues with relying on the Group Super market and there has been a
significant decrease in the advised life market over the period LIF has been in operation. This
demonstrates that the increase in underinsurance has been impacted by the combination of
policy measures (LIF and Protecting your super) to negatively affect the level of cover of
everyday Australians.
• The FPA therefore supports the continuation of the existing exemption on life insurance
commissions under the life insurance framework.
• We would note, we are unclear on the results of ASIC’s life insurance advice review and are
unable to comment at this point on whether the existing remuneration limits are appropriate or
not. What we are able to comment on however is that many members have ceased providing life
insurance advice to their clients at current commission rates as they do not remunerate the
financial planner sufficiently for the work required to provide recommendations and
implementation assistance to the client.

52. Are there alternatives to removing the exemptions to adjust adviser incentives, reduce
conflicts of interest and promote better consumer outcomes?
• There are exemptions which operate in the wholesale, sophisticated, institutional investment
space where exemptions to a number of financial advice conduct and consumer protection leave
consumers in vulnerable positions and can adversely affect the financial position of both
consumers directly, but also where the investments are ultimately part of products sold in the
retail space. In terms of direct sales however, there are many examples of where these conflicts
have led to significant consumer detriment directly due to the conflicted remuneration
arrangements.

53. Has the capping of life insurance commissions led to a reduction in the level of insurance
coverage or contributed to underinsurance? If so, please provide data to support this claim.
The retail advised life insurance market in 2021 was made up of:
• individual advised market made up 53% of premiums paid to the life insurers,
• group super market made up 37% (APRA Life insurance claims and disputes statistics).
Further, while the number of Australians who obtain cover through the group super market is higher, the
levels of cover are substantially lower (on average $782k for retail advised Life (death) cover and $841k
for TPD, versus $219k for Group death and $187k for Group TPD). Group super insurance plays an
important role in ensuring that a greater proportion of the population have access to life insurance
however it is rarely enough for average Australians in the event of an insurable event.
For example, financial planners will typically consider their clients debt and requirements to support the
education and living costs of young children to reduce stress on the surviving spouse and minimise the
risk of financial hardship. In comparison to the average group death and TPD levels noted above, the
average mortgages in Australia are now over $500k meaning group cover would not be sufficient to meet
the needs of the surviving family.
NMG Consulting do research on the level of new business volumes, and their research shows that retail
advised new business volumes have declined from $638 million in 2016, before the LIF reforms
commenced, to just $317 million in 2021. This number is expected to fall further over the next few years,
driven largely by the following factors:
• The significant exit of financial advisers from the profession and particularly those who are active
in the life insurance advice market.
• The reduction in remuneration has made it economically unviable to provide life insurance advice
to the bulk of the population.
• The APRA intervention in the Individual Disability Income Insurance market has led to substantial
changes to Income Protection products, making it very difficult for generalist to come up to speed
in terms of understanding these new products.
Overall, the number of financial planners who choose to provide life insurance advice has declined
substantially and this has meant that it has become much more difficult for Australians to access life
insurance advice.
The following table, based upon the APRA Claims and Disputes Statistics, highlights what has happened
to individually advised clients in recent years.

Individual Advised Policy Holders – ‘000

Cumulative %
Category 31-Dec-18 30-Jun-20 30-Jun-21 31-Dec-21 Change

Death Cover 1,994 1,717 1,653 1,621 -18.7%

TPD 1,177 996 968 972 -17.4%

Trauma 826 792 768 752 -9.0%

Disability Income 911 847 816 805 -11.6%

54. Is under insurance a present or emerging issue for any retail general insurance products? If
so, please provide data to support this claim.
• The FPA does not provide a response to this question.

55. What other countervailing factors should the Review have regard to when deciding whether a
particular exemption from the ban on conflicted remuneration should be retained?
• As noted, the FPA does not support any existing exemptions other than in relation to life
insurance commissions as per question 51.

56. Are consent requirements for charging non‑ongoing fees to superannuation accounts working
effectively? How could these requirements be streamlined or improved?
• No. While the FPA supported the policy intent of ensuring advised clients consented to the
collection of financial advice fees from their superannuation accounts and were provided the
opportunity to give ongoing consent on an annual basis, the implementation of the measures by
superannuation funds has caused significant additional paperwork to clients/members and a
significant increase in administrative costs to financial planning businesses.
• The FPA called on Government, regulators and superannuation funds to create a consistent
approach to fee collection authorisation processes for the benefit of the members who have
undertaken financial planning services. Every super fund currently requires their own forms to be
completed. There is no consistency in the information required to be provided. There are many
funds which will not release fees unless the client’s full statement of advice is provided which
 creates a significant privacy risk for the client. And there are examples of super funds requiring
consent renewal more frequently than on an annual basis, some as frequently as on a quarterly
basis from the member.
• The FPA recommends that the review recommends the creation of a standardised information set
through either the creation of a data standard for fee consent or at a minimum a standardised
form which can be completed by clients and is accepted by all superannuation funds.

57. To what extent can the requirements around the ongoing fee arrangements be streamlined,
simplified or made more principles-based to reduce compliance costs?
• As recommended above, the FPA recommends that the review recommends the creation of a
standardised information set through either the creation of a data standard for fee consent or at a
minimum a standardised form which can be completed by clients and is accepted by all financial
product types.
• The FPA has attempted to work with the FSC on such an outcome and while the FSC has
established guidance for members, there has been no consensus form established.
• Alternatively, the FPA recommends that products be required to accept any form of client consent
provided by a financial planner which complies with the minimum legal requirements as set out in
the Corporations Act 2001 and ASIC legislative instruments.
• This is in contrast to the standardised AML/CTF ID Verification forms which have been accepted
by all products for over 15 years and demonstrates the ability of such standards to be created
when required.

58. How could these documents be improved for consumers?

• Ultimately, the creation of a data standard which allowed a client to securely and electronically
sign a consent and be provided to the appropriate product using straight through processing
would provide the optimal efficiency and transparency for both the client and the product
providers.

59. Are there other ways that could more effectively provide accountability and transparency
around ongoing fee arrangements and protect consumers from being charged a fee for no
service?
• At present, clients in a 12-month period will have the fees they will be charged for advice provided
to them disclosed up to 10 times (minimum legal requirement is 7) and are required to provide
consent up to 5 times (minimum legal requirement is 4) assuming the client pays for their advice
through a single financial product. These include:
o FSG (disclosure)
o Engagement letter (disclosure)
o SOA/ROA (disclosure)
o Authority to proceed (disclosure and consent)
o Ongoing fee agreement (disclosure and consent)
o Product applications (disclosure and consent)
o Ongoing fee consent form/s (disclosure and consent)
o Fee disclosure statement (disclosure)
o Ongoing fee agreement renewal (disclosure and consent)
o Ongoing fee consent form/s (disclosure and consent)
• While not all of the documents listed above are legally required, the above list is the standard
required of most financial planners by their licensees and products to collect fees. This causes
clients significant confusion and administrative burden and in a regulatory environment which
combines consumer protections against fee for no service in the forms of:
o the professional standards regime code of ethics,
o remediation obligations under the Royal Commission recommendation implementation,
 o availability of AFCA, and
o discipline through the FSCP.
• The FPA recommends that at a minimum, the requirement for additional consent forms to the
ongoing fee agreement and renewal adds little additional consumer protection benefit for a
significant administrative cost on both the financial planning business and the client.

60. How much does meeting the ongoing fee arrangements, including the consent arrangements
and FDS contribute to the cost of providing advice?
• The FPA will provide this data as part of the Coredata ‘Cost of Advice’ research.

61. To what extent, if at all, do superannuation trustees (and other product issuers) impose
obligations on advisers which are in addition to those imposed by the OFA and FDS
requirements in the Corporations Act 2001?
• Feedback from FPA members and evidence provided through forms demonstrates that
superannuation trustees in particular ask for significantly more information, and in many cases
copies of the client’s SOA before accepting the client’s fee consent authority.
• Non-super products in general require less additional information and are often more flexible in
their approach to non-product created consent forms, but not in all instances.

62. How do the superannuation trustee covenants, particularly the obligation to act in the best
financial interests of members, affect a trustee’s decision to deduct ongoing advice fees from
a member’s account?
• The FPA does not offer an answer to this question but would observe the tone of the joint ASIC
and APRA guidance to superannuation trustees in relation to release of financial advice fees
which are recommended under the professional standards and discipline framework and
consented to by the member.

Disclosure
The financial advice disclosure and documentation framework should be updated to ensure it is
designed with clients’ best interest at the fore and demonstrates the advancement of the profession.
To achieve this, it is suggested a separation of what is required to be disclosed to the client to meet
regulatory and consumer protection requirements, and the documentation of the financial advice. This
aims to improve the understandability and client engagement of the documentation, and therefore the
client’s understanding of both the financial planner/client arrangement and the financial advice.
However, there must be flexibility in the requirements to allow for the variety of business models providing
financial advice and to meet the needs of clients seeking limited scope advice.
63. How successful have SOAs been in addressing information asymmetry?
• The success of SOAs in addressing information asymmetry between the client and their financial
planner has been restricted by their size and the addition of generic and legalistic content
requirements as interpreted by licensees to mitigate risks around consumer complaints and
regulator action. Clear, concise and effective has been ignored for the perceived protection of 100
pages of mainly generic statements which don’t address the client’s goals and objectives.
• Combining in one document to the client the disclosure of information to meet regulatory and
consumer protection requirements with the documentation of the financial advice stifles the
readability of the SOA and subequently limits the ability of clients to understand the information
being provided.
 • The FPA has provided guidance to members on the use of both digital 24 (including a combination
of scalable text, infographics, graphics, icons, video, audio and other engaging elements) and
video only 25 (recording of advice delivery meeting covering regulatory requirement) formats to
deliver SOAs to address the information asymmetry in a legally compliant document.

64. How much does the requirement to prepare a SOA contribute to the cost of advice?
• The FPA is in the process of conducting a ‘Cost of Advice’ study which will provide a detailed
breakdown of the cost elements of providing personal financial advice to a retail client. Existing
data collected by the FPA shows the cost to produce an SOA is in 2020 was $2,344, while
ongoing advice cost an average of $2,730.

Source: FPA Member Satisfaction Research 2020, Oct 2020.

65. To what extent can the content requirements for SOAs and ROAs be streamlined, simplified or
made more principles-based to reduce compliance costs while still ensuring that consumers
have the information they need to make an informed decision?
• This question highlights the muddled purpose of the SOA.
o The SOA is the output of the advice process. The primary purpose of the SOA should be
to help the client make an informed decision about the advice. However, due to the
advice requirements, the SOA has become the advice presentation, a compliance
document, and a disclosure document.
o Streamlining, simplifying or making the SOA and ROA requirements more principles-
based will not reduce compliance costs.
o As discussed above, if the duplication of the financial advice requirements in the law with
the Financial Planners and Advisers Code of Ethics 2019 is not addressed, the cost to
provide financial advice will likely not improve.

24
FPA Future of the SOA Report. https://fpa.com.au/the-future-of-the-soa/
25
FPA SOAP Box Set – Video SOAs (to be provided separately to Treasury)
 • At a high level, the legal requirements should permit greater use of incorporation by reference
and not repeat requirements of content already included in the PDS, FSG, or service
agreement/letter if one is used by the financial planner.
• Disclosure must be scalable and in a form that best provides the information a client needs to
understand advice in their best interests. Where advice can be provided over the phone and
sufficient record of the advice be provided to the client to support their understanding with simple
generic forms of additional information, the current requirements of an SOA should not be
required.
• In summary, a shift to outcomes-based regulation to ensure the client understands the advice
provided and is given a document which educates and informs the client in as much or as little
detail as required would significantly improve the documented disclosure of advice from the
current input (i.e. specific inclusions) based regulation required today.

66. To what extent is the length of the disclosure documents driven by regulatory requirements or
existing practices and attitudes towards risk and compliance adopted within industry?
• As discussed in the first section of this submission, the FPA agrees with the ALRC’s view that
history has shown that every financial advice regulatory reform has layered additional
requirements on top of the existing obligations, without removing or simplifying how the
obligations work together.
• The SOA is a symptom of the historic development of the advice provisions in the Corporations
Act 2001. In practice, the purpose of the SOA has become muddled as it tries to meet the
competing objectives of the client, financial planner, licensee, regulator and the government.
Key objectives of disclosure and advice documentation
o For the client
▪ Understand the relationship with planner
▪ Understand and agree on services, time involved, and costs
▪ Understand what client’s responsibilities are / what they are committing to
▪ Feel comfortable that the planner understands them and what they are wanting
▪ Feel comfortable there are protections
▪ Understand the advice process
▪ Feel confident that there is transparency in the relationship and the services they
will are receiving – no surprises!
▪ Understand the advice and feel confident about the next steps
o For the financial planner
▪ It helps the client understand the advice
▪ Facilitates positive client-planner relationship
▪ Protect themselves from audit / regulator issues and potential future complaints
▪ Effective and efficient, not onerous or costly
▪ Enables evidence of the 6 steps in the advice process undertaken to be
maintained in an efficient manner on file and provided to the client on request (as
per accountants)
▪ Utilise incorporation by reference
• Maybe client directed - Could be included in first discussion – what
information does the client want included in SOA?
• Diary notes still time consuming – technology helps
o For the regulator and licensee
▪ Compliance document
▪ Shows planner has not breached the law or licensee policies
o Government
▪ Consumer protection
▪ Affordable advice
▪ Accessible advice
• The SOA has become a disclosure document, compliance document, and client advice
document. The result is lengthy SOAs that do not meet the needs or expectations of consumers.
67. How could the regulatory regime be amended to facilitate the delivery of disclosure
documents that are more engaging for consumers?
• ASIC states:
o The SOA, among other financial advice disclosure obligations, aims to ensure that your
clients receive good quality advice and are able to make informed decisions.6
• The Tax Practitioners Board suggest (but do not mandate) a written agreement with the client
setting out the terms and conditions of the engagement prior to services being delivered.
Completed taxation documents containing relevant detailed client information is an example the
output documentation provided by a tax agent to the client. Working papers that assisted the tax
agent formulate the taxation document remain on file and are audited.
• In line with the TPB’s approach, the FPA recommends consideration of the following personal
financial advice disclosure and documentation framework. The aim of this framework is to make
documentation more understandable for clients. It is doubtful that this change will have any
bearing on the cost of advice as it relates only to the presentation of documentation and does not
change the legal requirements or work involved in developing the advice.
Documentation requirements guiding principles:
o Must be client focused.
o Should be flexible and scalable to cater for different types of financial advice and various
business models.
o No duplication in the information provided to the client - maximise incorporation by
reference and be client focused.
o Consolidate the number of consent forms required to be signed by the client into one or
two forms that are accepted by all parties (including product issuers).
o ‘Documents’ permitted to be given in a format selected by the client, including using
technology.
Documents to be given to the client:
o Financial Services Guide (FSG) - disclosure information about the corporate entity
▪ Generic disclosure
▪ As per the requirements in RG175 – or amended if improvements can be made
▪ Remuneration – e.g., fee schedule and fee methodology
▪ Conflicts of interest
▪ Disclosure of lack of independence
▪ Service entity is authorised / competent to provide
▪ Information about other documents to be provided to the client
▪ Dispute resolution
▪ Compensation arrangements
o Service agreement – Best practice only, not compulsory - initial and ongoing
▪ Specific disclosure about the planner/client engagement
▪ Does not repeat information contained in the FSG
▪ Disclosure specific to the services to be provided to the client
• Clearly defined scope that is appropriate to the subject matter of the
advice
• Scope of advice engagement
• Fees/remuneration for advice services to be provided -
o Fees for initial advice
o Fees for ongoing service if required
• Timeframe for the provision of services
• Third parties likely to be involved in the provision of the service
• Privacy
o disclosure of client information and use of it by third parties
o Record keeping
o Client consent to receive documents electronically
 • Client consent - client provides consolidated consent in one form for:
o services to be provided
o planner remuneration
o advice fees to be paid through product – this consent to be
accepted by all product providers and platforms
o authority to collect information
o AML forms
▪ Include any ongoing engagement – services and costs
▪ To be given prior to the provision of financial advice
o Financial Advice
▪ Advice document (not disclosure)
▪ Does not repeat information contained in the FSG or service agreement
• Simple brief statement of incorporation by reference
▪ Sets the advice
• Scope - simple brief statement of the scope and of incorporation by
reference
• Client’s relevant circumstances
• Prioritised, specific and measurable goals and objectives
• Strategic and product recommendations appropriate to the client’s
circumstances
o Reasons why advice is in best interest of client
o Benefits/disadvantages of advice
o Product fees (if applicable)
▪ Does not repeat information in the PDS – incorporation
by reference
▪ PDS to be given to the client at the time of the advice (if
applicable)
• Consideration of the impact of the advice
o Tax or social security consequences
o Broader long-term interests
o Acting / not acting on advice
• Authority to proceed
o Fees to implement advice recommendations
o Client consent to implement advice as presented
▪ Financial plan is potentially a ‘working document’ updated overtime for:
• Client review
• Further advice
• Changes in client circumstances
▪ Easily maps to the features of quality advice measures.
▪ Is scalable and provides as much or as little information as required by the client
to understand the recommendations which have been made.
Working papers - to be kept on client file
o Fact find – relevant info only in SOA
o Alternative comparisons of products/platforms on file – clients want to know it has been
done but not the detail of the information. This is confusing to them. The financial plan
should focus on the advice and recommendations and why it benefits them
o Evidence that the planner has met the standards in the Code of Ethics and used
professional judgement.
o Client consent.

68. Are there particular types of advice that are better suited to reduced disclosure documents? If
so, why?
 • All advice documentation should be flexible and scalable to cater for different types of financial
advice and various business models. Further, professional judgement should be used as to
where the best provision of information is documented for the client rather than specifying it
inclusion in specific documents.
• The FPA has worked with ASIC, licensees, compliance experts, lawyers, technology providers,
financial planners and consumers to develop and encourage members to provide both digital 26
and video-based27 statements of advice to their clients given ASIC’s technology neutral regulation
of advice disclosure.
• In saying this, a large part of the reason financial advice disclosure has become unwieldy relates
to the prescriptive rules-based disclosure obligations. Simple advice should be able to be
provided to clients simply without the need to produce expensive disclosure documents allowing
a professional to diagnose a strategy and make a recommendation to solve the client’s financial
advice need.
• This requires a shift from prescriptive rules-based regulation to outcomes-based regulation. In
this case ensure the client has sufficient, but not more, information to understand the
recommendations including risks and make an informed decision on the right course of action for
themselves.

69. Has recent guidance assisted advisers in understanding where they are able to use ROAs
rather than SOAs, and has this led to a greater provision of this simpler form of disclosure?
• On one hand yes, ASICs guidance was both clear and welcome. However, feedback received
from FPA members indicates that very few licensees allowed the ROA measures to be used
under the COVID relief and subsequently. The feedback suggests that licensees were unwilling to
make short-term amendments to compliance obligations, particularly in an environment where
there was already significant regulatory change being undertaken, uncertainty around the
operation and time frames the measures would be in place, and the general disruption caused by
lockdowns and stay at home orders which required significant amendments to the operation of
financial planning businesses in general.
• Additionally, the culture of fear caused by regulatory enforcement being at odds with regulatory
guidance around the provision of an incorrect disclosure document, or insufficient information in
the document, has led in many instances ROAs to be nearly as long and costly to produce as an
SOA.

70. Are there elements of the COVID-19 advice-related relief for disclosure obligations which
should be permanently retained? If so, why?
• Yes. The coronavirus pandemic was an unprecedented event that significantly impacted all
Australians, all facets of life, and all businesses. The financial planning profession was no
exception.
• Important lessons should be learned from the pandemic to ensure the regulatory landscape can
respond quickly to future crises that impact a large number of consumers who need to act quickly
to protect their financial affairs. This includes situations that have a high impact on a large
percentage of consumers in a small community such as natural disasters, as well as more
widespread crises.
• The following relief should be made permanently available for financial planners to provide advice
to clients to act quickly when a crisis occurs impacting a large number of clients:
o targeted relief to financial planners to allow a Record of Advice to be given to existing
clients, instead of a Statement of Advice, in certain circumstances
o flexibility in the timeframe for providing an ROA/SOA to clients needing time critical
advice

26
The Future of the SOA. https://fpa.com.au/the-future-of-the-soa/
27
FPA will provide directly to Treasury.
 o Relief from the Fee Disclosure Statement (FDS) and renewal notice obligations, such as
ASIC’s COVID no action position
o Clarity on the legal ability to accept client consent by electronic means, such as electronic
signature, video meetings, verbal consent by phone
o Certainty that customer due diligence procedures, such as client identification verification
for product providers for DDO and AML purposes, can be completed using electronic
means.
Accountants
71. Should accountants be able to provide financial advice on superannuation products outside
of the existing AFSL regime and without needing to meet the education requirements imposed
on other professionals wanting to provide financial advice? If so, why?
• Professionals in financial services should be able to provide advice to their clients on any matter
they are competent in. From this perspective, where an accountant has demonstrated and been
assessed through education or experience as competent to provide financial advice on any
aspect of a client's financial position, they should be able to. This extends from tax, business,
trust structures through to classes of financial products and financial products. The same goes for
all providers of financial advice in relation to tax, business, credit and financial advice.
• There are two issues limiting this currently:
o Firstly, the education standards which only assess competencies through education.
o And secondly, the AFSL requirements which are not fit for purpose for the provision of
professional services to Australians.

72. If an exemption was granted, what range of topics should accountants be able to provide
advice on? How can consumers be protected?
• Exemptions should not be granted (as per Royal Commission recommendation 7.3). The entry,
registration, conduct and consumer protection laws and regulations in relation to financial advice
provision should be recast in light of the professional services being provided by financial
planners to their clients. This is a direct professional service – which while supported by licensees
– is a trust and fiduciary relationship between the individual financial planner and their clients.

73. What effect would allowing accountants to provide this advice have on the number of advisers
in the market and the number of consumers receiving financial advice?
• It is not possible to answer this question without understanding the proposed model under which
the exemption would operate.

74. Is the limited AFS licence working as intended? What changes to the limited licence could be
made to make it more accessible to accountants wanting to provide financial advice?
• The FPA has no evidence in relation to the operation of the limited license regime, but feedback
suggests most limited AFSLs have been terminated which would suggest it has been ineffective
in its intent.

75. Are there other barriers to accountants providing financial advice about SMSFs, apart from
the limited AFSL regime?
• The FPA provides no response to this question. However, we do note we have provided a
significant number of SMSF set up schemes to ASIC over the last few years which would suggest
neither the limited, full or professional standards under which accountants operate are having a
significant impact on the set up of or advice on SMSFs more broadly. This is a significant
consumer protection concern given the risks, knowledge, skill and governance required by
Australians to compliantly run their own SMSF.
Wholesale/Sophisticated Advice
76. Should there be a requirement for a client to agree with the adviser in writing to being
classified as a wholesale client?
• Yes. Informed consent should be required for a client to be treated as ‘wholesale’, with an opt-in
requirement to reconfirm consent every two years.
• Wholesale clients are permitted to access more complex, sophisticated and higher-risk financial
products and strategies. Current advice, disclosure, and consumer compensation requirements
do not apply to the provision of financial advice to wholesale clients.
• Practitioners who provide personal financial advice to wholesale clients only are not required to
meet the standards in the Code of Ethics. The Code applies to ‘registered relevant providers’ who
are practitioners authorised to provide personal financial advice to retail clients.
• Many individuals who lack the necessary knowledge, understanding and experience of financial
matters now fall into the definition of a wholesale client putting them at risk of being
inappropriately classified as wholesale clients and unprotected by the law.
• There is currently no consent required by the client to be treated as a wholesale client and so no
knowledge is required as to what the client is forgoing in terms of protections afforded to retail
clients, regardless of the client’s level of financial literacy. This results in greater risk being borne
by the client not only due to the lack of retail protections, but as the products offered to wholesale
clients are often riskier and time sensitive.
• The Financial Planners and Advisers Code of Ethics 2019 Explanatory Statement defines
informed consent as “consent requires that the client understands and agrees to the
arrangements. You will need to be satisfied of this and have reasonable grounds to be satisfied”
[para 43].
• The informed consent should allow the financial services provider to be satisfied that the client
understands the following matters, particularly in comparison to if they were treated as a retail
client:
o the disclosure documents the client will not receive.
o restrictions on accessing dispute resolution schemes - consumer protections and
compensation through AFCA and under the new breach reporting regime do not apply to
wholesale clients.
o the requirements of the Corporations Act 2001 that the representative does not have to
comply with.
o the Financial Planners and Advisers Code of Ethics 2019 does not apply unless the
provider is a relevant provider also providing advice to retail clients.
o the client has the requisite financial literacy and experience to make suitable financial
decisions and understand the risks associated with the products available to wholesale
clients.

77. Are any changes necessary to the regulatory framework to ensure consumers understand the
consequences of being a sophisticated investor or wholesale client?
• Yes. The following changes should be made to the regulatory framework to ensure consumers
understand the consequences of being a sophisticated investor or wholesale client:
Sophisticated investor / wholesale client warning
• A sophisticated investor / wholesale client warning, clearly and specifically detailing the consumer
protections that will be forfeited as a wholesale client, is to be provided prior to informed consent
being given and the provision of a financial service.
• This warning, to be provided to clients prior to advice being provided / investing in a product
should state:
o Products offered to wholesale clients are typically more complex and maybe associated
with higher risks.
o It is assumed the client has the requisite financial knowledge and experience to
understand the associated risks and products
 o The protections associated with being classified as a ‘retail client’, such as consumer
redress and compensation through the Australian Financial Complaints Authority (AFCA)
are not available to wholesale clients.

Consistent regulatory requirements across all financial services

• The Corporations Act 2001 should be amended to ensure consistency between Chapters 6D and
7, so the wholesale test is applied uniformly across all financial products and services and
securities.
• It is important that financial planners, brokers, intermediaries and issuers of securities are all
operating from the same classifications and a client defined as ‘wholesale’ would be classified as
such across all products and services.
Professional and ethical obligations
• Financial planners who are not relevant providers should be compelled to comply with the
professional and education obligations that apply to financial planners providing advice to retail
clients (relevant providers). The professional and education standards should apply to providers
of financial advice to wholesale clients.
• The Financial Planners and Advisers Code of Ethics 2019 only applies to those financial
planners authorised to provide personal advice to retail clients (‘relevant providers’); and the
professional standards relating to education and training also do not apply if the financial planner
is not a relevant provider.
• Hence, the professional and education standards do not apply to financial planners advising
those investors that typically can access more complex, sophisticated and higher-risk products
and strategies as a sophisticated investor / wholesale client. This puts these clients at significant
risk of harm when the community expects a certain level of professionalism, ethics and education
from their advice provider.
• Ultimately the provider of a wholesale recommendation should consider the sophistication and
understanding of the client to make the investment and be accountable if and when it is shown
that the client was not.
Restrictions on certain products
• The Corporations Act 2001/law should continue to treat individuals as retail clients for the
purchase of general insurance products, superannuation products, RSA products and traditional
trustee company services.
• Currently wholesale clients cannot be advised by wholesale advisers to buy, hold or sell and what
to do with their retail super. Allowing superannuation and associated contribution strategies/
recommendations to be provided to individuals as wholesale clients may have significant
unintended consequences for individuals’ superannuation assets, including in relation to
mandatory contributions. This should continue to occur under the regulatory framework for retail
client personal advice to ensure consumers are appropriately protecting their retirement assets
and being advised under the Financial Planners and Advisers Code of Ethics 2019.

78. Should there be a requirement for a client to be informed by the adviser if they are being
classified as a wholesale client and be given an explanation that this means the protections
for retail clients will not apply?
• Yes. In addition to the response to question 58, the advice provider should also be required to
explain to the client why they are being classified as a wholesale client / sophisticated investor
and the requirements the client satisfies to be classified as such.
 • The FPA acknowledges the Term of Reference 6.3 states that the Review will not make
recommendations on:
o 6.3 Changes to the definitions of ‘retail client’, ‘wholesale client’, and ‘sophisticated
investor’, including the income and asset thresholds
• The lack of disclosure and conduct obligations that apply to services provided to wholesale clients
/ sophisticated investor puts clients at risk of inappropriately being classified and treated as
wholesale, particularly consumers with a lack of the necessary knowledge, understanding and
experience of financial matters, giving them access to more complex, sophisticated and higher
risk financial products and strategies. This risk is facilitated by the income and asset thresholds
for ‘wholesale clients’.
• At the time of the implementation of the wholesale asset/income test in 2002, only 1.9 per cent of
the population were eligible to be classified as wholesale clients. This figure has risen to 16 per
cent in 2021 (3.25 million individuals) and if unchanged could rise to 29.1 per cent of the
population by 2031 (6.78 million individuals) and by 2041, 43.6 per cent of the population (11.5
million individuals).7
• Due to the inclusion of a client’s property (such as the principal residence) and a general increase
in earnings over the years, with no increase in the legislated thresholds for client classification,
many individuals now fall into the definition of a wholesale client, that would not have been the
case at the time of the original drafting the legislation.
• The Review is urged to make a finding (in absence of a recommendation) that the income and
asset thresholds for ‘wholesale clients’ and ‘sophisticated investor’ are woefully inadequate and
should be reviewed to minimise the risk of consumer harm:
o Amend the net assets test:
▪ bring in line with the general Transfer Balance Cap (TBC), currently $1.7 million
and associated indexation of this. Application of the TBC limit to the assets test
should be to the individual (e.g., $1.7m); or double the TBC limit (e.g., $3.4m) for
a couple.
▪ exclude the net asset value of the home, and
▪ exclude the value of a non-commutable defined benefit pensions/income
streams.
▪ determine (through consultation) appropriate transitional arrangements for
existing clients being treated as wholesale
o Increase the current income threshold to $350,000, indexed in line with AWOTE when
the transfer balance cap adjusts and increased by $5,000 increments, and defined as
‘adjusted taxable income’ 8.
o Increase the product value test from $500,000 to $1 million and clarify (through
consultation):
▪ whether the test should include the amount advised upon versus the amount
invested
▪ separate treatment for members of a couple, or joint investors
▪ treatment of advice provided at different points in time.

Other measures to improve the quality, affordability and accessibility of advice

Licensees, Professional Associations and Regulators
79. What steps have licensees taken to improve the quality, accessibility and affordability of
advice? How have these steps affected the quality, accessibility and affordability of advice?
 • Licensees have tried their best to develop an efficient advice process within the constraints of the
current confusing and rapidly changing regulatory regime. No business deliberately sets out to
create inefficiencies and additional cost drivers.
• The challenges faced include onerous disclosure requirements, industry fragmentation (~2,000
licensees) and varying levels of capability to solve an issue that requires a re-write of the rules to
properly solve for.

80. What steps have professional associations taken to improve the quality, accessibility and
affordability of advice? How have these steps affected the quality, accessibility and
affordability of advice?
• Outside of advocacy on behalf of members, the FPA assists its members in a number of ways to
provide quality advice to their clients through best practice guidance, responding to enquires, and
online member forums, as well as events, CPD and training opportunities on key issues,
emerging risks, and regulatory reforms and requirements. Without providing a comprehensive list,
the FPA has assisted members with the following initiatives:
o FPA Code of Professional Practice
▪ Ethical principles
▪ Practice Standards
▪ Rules
▪ Contractual obligation with members to adhere to Code
▪ Independent Conduct Review Commission to hear consumer, member and FPA
complaints against members for alleged breaches of the Code.
o FPA best practice guidance
▪ Financial Planners and Financial Advisers Code of Ethics Information Hub
▪ Understanding the FASEA Code of Ethics
▪ Life Risk Advice Guide – Providing life risk advice under multiple codes
▪ Mapping FinTech to the Financial Planning Process – Why FinTech is not a
threat
• Technology buyers guide
• Advice process mapping and cost tool
▪ Breach Reporting Obligations
▪ Complaints handling obligations
▪ Design and Distribution Obligations
▪ Reference Checking
▪ Ongoing fee arrangements
▪ Best Practice Guidance – Putting your clients first
▪ Taking other steps – Best interest advice in a strategic world
▪ Delivering Excellence – Further advice solutions for a superior client experience
▪ File Note Guidance – The importance of completing file notes
▪ Fee for Service Toolkit
▪ A guide to bulletproof financial planning (Future of Financial Advice reforms)
▪ Future of Financial Advice Easy Reference Guides
▪ Future of Financial Advice FAQs
▪ Further advice guide
▪ Example financial planning dashboard – Client review
▪ TASA – A guide for FPA members
▪ Prepare for TASA commencement fact sheet series
▪ FPA Policy Platform - Affordable Advice, Sustainable Profession
▪ AML/CTF
• FPA / FSC Guidance note
• FPA / FSC FATCA and CRS Guidance
• FPA / FSC Customer Identification Forms (12 forms in total)
▪ Member guidance on Managed Discretionary Accounts
o Federal Budget Wrap (Annual)
o COVID-19 regulatory relief and Government rules portal
o Shortform Example SOAs:
▪ Shortform SOA Guide
▪ Retirement strategy
▪ Savings plan
▪ Transition to Retirement (TTR)
▪ Life risk
▪ FAQs
o Modern Disclosure:
▪ The future of the SOA report
▪ FPA SOAP Box Set – Video SOA production
o Elder abuse information hub (online)
o Other resources to help FPA members to understand and implement policy reforms:
▪ Fact sheets
▪ FAQs – regularly updated
▪ Website information
▪ Webinars – 60 hours of FPA delivered webinars in 2020/21.
▪ Weekly newsletters
▪ Money and Life magazine – monthly magazine publication covering best practice
▪ Money and Life Professionals – fortnightly email newsletter covering best
practice and thought leadership
▪ Alerts for significant and urgent policy and regulatory announcements
▪ Online forum - FPA Community is a secure, online discussion forum for FPA
members to connect, collaborate and communicate with their peers. FPA
Community is also our main channel for seeking member input into policy
submissions and consultations. It also provides a platform for members to ask
questions, start a discussion or share information. In the 2020/21 financial year,
6,737 members were active on FPA Community, with 2,384 discussion threads
and over 10,900 discussion replies posted. Most threads relate to regulatory
requirements and changes, and practical issues members may experience in
relation to meeting their obligations.
o Continuing Professional development (CPD) - Each year, the FPA provides a
comprehensive program of CPD via online learning, webinars, podcasts, events and
articles. This program is made available through our online FPA My CPD portal. Our
2020/21 CPD webinar series enabled FPA members to access 56 plus hours of free
online learning sessions across practice management, technical, regulatory and
professional value capabilities. We also offer a CPD accreditation service that provides
independent evaluation and accreditation of professional development activities outside
the FPA, according to our CPD Policy and Accreditation guidelines. In 2020/21 we
accredited 2,341 hours of CPD for the profession. In addition, our CPD partners
accredited another 1,000 plus hours of CPD.
o Professional Year Tool - The FPA provides support to members and businesses
conducting the Professional Year standard that all new industry entrants are required to
complete before they are qualified as a financial adviser. To help members and
businesses create and deliver a comprehensive training plan for the Professional Year,
the FPA offers a Professional Year (PY) tool to simplify and streamline the PY process.
The PY tool has helped to fill a gap in the market and includes a workflow tool for
creating and tracking a PY training plan, as well as mentoring and coaching resources.
The PY tool offers licensee, supervisor, and candidate views of each step on the PY
pathway and a completion certificate is created automatically when a supervisor confirms
all stages are complete for each quarter.
o Member enquiries - During the 2020/21 financial year, the FPA assisted members by
responding to over 8,000 member emails and 5,000 member calls
o Ethicall - Ethi-call sessions are a private one-hour call with an ethics counsellor that
offers independent and objective guidance to help you work through an ethical decision.
 The counsellors are experienced in providing guidance to financial planners. This service
is free and is provided and funded by The Ethics Centre, supported by the FPA.
o Events
▪ Annual National Congress – regulatory matters are the predominate topic of the
workshops and plenary sessions
▪ Annual Road Show series
▪ Master Class series
▪ Over 100 local chapter events in over 30 locations around the country to bring
together the professional community.
o Consumer Engagement:
▪ Money and Life28 - a consumer focused financial wellbeing information and
education hub and publication.
▪ Financial Planning Week – consumer education week on the benefits of financial
planning
▪ CFP Advertising campaign.
▪ Find a Planner – professional financial planners directory
▪ Match My Planner – matching consumers with professional CFP financial
planners.

81. Have ASIC’s recent actions in response to consultation (CP 332), including the new financial
advice hub webpage and example SOAs and ROAs, assisted licensees and advisers to
provide good quality and affordable advice?
• A long criticism of ASIC was the disparate nature of information and guidance in relation to the
provision of financial advice. The FPA had encouraged ASIC for many years to consolidate
guidance, information and FAQs into a single hub to improve the navigability of finding the right
information to assist in the provision of compliant financial advice.
• While ASIC’s implementation isn’t complete, the Financial Advice Hub is a significant and
welcome improvement on the ad hoc approach ASIC had taken to that point. ASIC is also
responsive to suggestions for improvement and the creation of additional FAQs as new issues
arise over time. The FAQs also assist in bursting a lot of myths which pervade the profession in
relation to laws, regulations and ASIC’s views on compliance.

82. Has licensee supervision and monitoring of advisers improved since the Financial Services
Royal Commission?
• The FPA understands a study was undertaken after the implementation of Report 515 by ASIC to
review the improvements in file audit practices. The FPA is unaware of the results of this research
which has to date not been published by ASIC.

83. What further actions could ASIC, licensees or professional associations take to improve the
quality, accessibility or affordability of financial advice?
• It is imperative that AFCA be considered as a key influencer on the quality, accessibility and
affordability of financial advice. AFCA’s interpretation of the law and the regulators’ requirements
often vary depending on the circumstances of the complaint being considered. The EDR
scheme’s decisions do not set precedent for future complaints, which results in inconsistency in
the way AFCA may apply the regulatory requirements to a complaint. Licensees adapt processes,
policies and the requirements they place on planners, to minimise the risk of any AFCA
determination against them in the future. This creates another level of inconsistency and
uncertainty in the regulatory environment that sits outside the provisions in the primary legislation.
• FPA has identified a number of recommendations in its submission for the Review to consider
that would improve the efficiency of regulatory oversight of financial advice providers and the

28
Money and Life – https://moneyandlife.com.au
positive impact such changes offer to the practical way advice is provided to improve affordability
and accessibility for consumers.
APPENDIX 1: FPA Policy Platform. Affordable Advice, Sustainable Profession
APPENDIX 2: History of financial advice regulatory change

History of financial advice regulatory change

2004 FSR transition ends

2005 FSR refinements

Statutory conflict management obligation

2006 Collapse of Westpoint

2007 Simpler Regulatory System Reforms

Enhanced fee disclosure

Global Financial Crisis 2008

Ripoll Report 2009

Collapse of Trio Capital Group

Collapse of Great Southern Group

Collapse of Timbercorp

Intra-fund advice commenced

2010 Margin lending reforms

Simple PDS reforms

ASIC Act reforms

Cooper Review of Superannuation

2011

2012 FOFA reforms (best interests and

remuneration for personal advice)

2013 Limited AFS licensing for accountants

Enshrinement of the terms ‘financial planner’

and ‘financial adviser’

Performance of ASIC Report 2014

Murray FSI

Tax Agent Services Act applies to personal

financial advice

Simple corporate bonds reforms

2015 Financial adviser register

2016

Ramsay Review of Consumer 2017

Compensation

Productivity Commission review of

competitiveness in superannuation

ASIC Enforcement Review

FASEA established
 Professional standards reforms

Productivity Commission inquiry into 2018

competition in the financial sector

Life insurance commissions reforms

Royal Commission into Misconduct in the 2019

Banking Superannuation and Financial
Services Industry

Australian Law Reform Commission 2020

Review of the Legislative Framework for
Corporations and Financial Services
Regulation

End of grandfathered commissions

2021 Royal Commission implementation:

· Single Disciplinary Body
· Breach reporting, investigation
and compensation regime
· Reference checking
· Annual renewal of ongoing fee
arrangement
· Fee consents
· Non-independent disclosure

Treasury Quality of Advice Review 2022

Year Event Legislation Changes Reasons Resources

1998 Twin Australian The Twin Peaks Model is based on ASIC and APRA The Wallis Inquiry recommended the Twin https://www.legislation.gov.au/De
Peaks Prudential being the two main regulators for financial services. Peaks Model for the regulation of financial tails/C2021C00278
Regulation services in Australia.
Authority Act
1998 ASIC’s role is to ensure consumer protection through
regulating the conduct of financial markets. ASIC
regulates this conduct through a licensing and
authorisation framework.

APRA operates as a prudential regulator by overseeing

authorised deposit-taking institutions, general insurers,
life insurers, friendly societies, private health insurers,
reinsurance companies and superannuation funds.

2001-2 Financial Financial This Act introduced chapters 7 and 8 of the proposed This legislation was introduced in Summary page:
Services Services Reform Corporations Act and outlined key definitions including response to the Financial Services
Reform Act 2001 wholesale clients, retail clients, financial products and Inquiry. The Inquiry found that the Financial Services Reform Bill
financial services. financial services industry had a complex 2001 – Parliament of Australia
and fragmented regulatory framework that
Licensing of financial service providers
increased compliance costs, reduced the
Second reading: ParlInfo -
This legislation outlined how a financial services licence efficiency of service providers and
can be obtained and the obligations that a financial confused consumers. FINANCIAL SERVICES
services licensee must uphold. REFORM BILL 2001 : Second
Reading
If an individual meets the criteria under section 913A There were three main forces driving
(Subdivision A), ASIC must grant the licence). ASIC has change including customer needs,
the power to impose conditions on the licence under technological driven innovation and Memoranda:
subdivision B. The licence may also be varied, significant regulatory change in the form https://parlinfo.aph.gov.au/parlInf
suspended or cancelled by ASIC under subdivision C. of liberalisation of trade and capital.
o/download/legislation/ems/r1256
This legislation also outlines the process of authorising a _ems_086741c1-ddf9-4c92-
representative of the licence. The Act also outlines that b391-
licensees are liable for any loss or damage caused by a A single licensing regime that regulates 895cbd2a8504/upload_pdf/3920
representative to a client. financial sales, advice and dealings was 2.pdf;fileType=application%2Fpdf
needed. Further, there was a need for a
Other relevant sections include banning or disqualifying product disclosure framework that was
persons from providing financial services, restricting the consistent and comparable.
use of terminology (e.g., independent, impartial), and
 protections when agreements are made with unlicensed The Australian financial services industry
persons. required reform to be globally competitive.
This legislation sought to align Australian
Financial Service Provider Conduct and Disclosure regulatory practices with global regulatory
This legislation introduced a general requirement to practice.
provide a Financial Services Guide (FSG) to retail
clients and details how a licensee or authorised
representative can uphold the obligation of relating to an
FSG.
There were also additional requirements introduced
when providing personal advice to retail clients including
a reasonable basis for the advice, to warn the client
when advice is based on incomplete or inaccurate, and
giving a Statement of Advice.
There are other disclosure requirements attached to the
provision of financial services including general advice
warnings or in prescribed situations.
Civil and criminal penalties are attached to the failure to
uphold these obligations.
Licensees and authorised representatives have
prescribed conduct that they have to uphold and there
are restrictions on their conduct such as a prohibition on
unconscionable conduct.
Financial Product Disclosure
This legislation deals with ongoing disclosure and
periodic reporting obligations when selling a financial
product. Product Disclosure Statement (PDS) must be
provided at the point of sale.

2012 FOFA Corporations Charging ongoing fees to clients These changes are the implementation of Future of Financial Advice
Amendment the Parliamentary Joint Committee on (FOFA) reforms
(Future of This legislation required financial advisers who charge Corporations and Financial Services
Financial Advice) ongoing advice fees to retail clients to discharge two Inquiry, known as the Ripoll Inquiry. This
Act 2012 new obligations. The first obligation is related to inquiry was a response to the collapse of 2012
disclosure. An adviser who is charging ongoing fees for Storm, Trio and Westpoint.
And more than 12 months must provide a fee disclosure Revised Memoranda -
statement. The second obligation is related to renewal
Corporations notices. If an adviser charges an ongoing fee for more https://parlinfo.aph.gov.au/parlInf
Amendment The legislation was seeking to improve o/download/legislation/ems/r4689
than 24 months, they are required to provide the client
(Further Future with a fee disclosure statement and a renewal notice. If consumer protection and trust in the _ems_28e3cadf-6bf9-49e4-af60-
of Financial financial planning industry by improving 5773bbf35af7/upload_pdf/36635
a client does not respond or opts not to renew, the
Advice the quality of financial advice and
Measures) Act arrangement ceases and the ongoing advice fee cannot enhancing industry standards. These 3.pdf;fileType=application%2Fpdf
2012. be charged. changes also aim to incentivise individuals
to save more in their superannuation,
If these obligations are not fulfilled, the client does not giving them greater security in
have to pay the ongoing advice fee beyond the relevant retirement.
Second reading ParlInfo - BILLS
12 or 24-month period.
: Corporations Amendment
The ability for the client to opt-out of an ongoing fee (Future of Financial Advice) Bill
arrangement at any time has been turned into law. These changes were required as clients 2011 : Second Reading
Whilst this is common practice to allow for clients to opt were unknowingly paying fees despite
out at any time, there was no implied term under the old receiving little or no services. Also,
law that gave the client the right to opt out. advisers were believed to be prioritising Supplementary memoranda
their interests over the clients to receive
Enhancements to ASIC’s licensing and banning conflicted remuneration. Specifically, https://parlinfo.aph.gov.au/parlInf
powers
consumers needed reassurance that their o/download/legislation/ems/r4739
ASIC received five main changes to their licensing and interests were being prioritised to ensure _ems_5e775fba-dd50-410c-b6f4-
banning powers. the integrity of the advice industry. aac1b0b91c54/upload_pdf/36629
3.pdf;fileType=application%2Fpdf
1. The licensing threshold was changed so ASIC
can refuse, cancel or suspend a licence
where a person is likely to contravene its
obligations. ASIC needed greater powers to determine 2014/2015
who could receive a licence and to
2. The statutory tests were expanded so ASIC remove unsatisfactory individuals. This is
has the power to ban a person if they are not because the entry threshold to the
of good fame and character, do not have licensing regime was low, and cancelling
adequate training or are not competent to
a licence was difficult. The previous law
provide financial services. These are all focused mainly on licensees rather than
factors that point to whether the individual is a their representatives. This meant that Supplementary Memoranda:
fit and proper person. https://parlinfo.aph.gov.au/parlInf
ASIC had difficulties stopping
o/download/legislation/ems/r5208
3. If an individual has been convicted for an unsatisfactory persons from entering the
_ems_bec64dec-cad4-4485-
offence involving dishonesty and the offence industry. 8e43-
is punishable by imprisonment for at least 3 35b38954b331/upload_pdf/5043
months, ASIC can consider this information to 30sem.pdf;fileType=application%
determine whether a person is not of good 2Fpdf
fame and character.
4. The banning threshold has been lowered to
allow ASIC to ban a person if they are likely to Second reading speech: ParlInfo
contravene a financial services law. - BILLS : Corporations
Previously, the threshold was if they will Amendment (Streamlining of
contravene financial services law. Future of Financial Advice) Bill
2014 : Second Reading
5. ASIC has been given the power to ban a
person who has been involved or likely been
 involved in a contravention of obligations by Future of Financial Advice
another person.
Best interests obligations
This legislation introduced many statutory obligations to
ensure financial advisers are acting in the best interests
of retail clients who receive personal advice.
The adviser is required to act in the best interests of the
client when giving advice. Within the legislation, several
reasonable steps can be taken to uphold the obligation.
If advisers satisfy these steps under section 961B(2),
advisers have access to a ‘safe harbour’. Further,
advisers must prioritize the interests of the client in the
event of a conflict of interests. A conflict of interest can
occur between the client’s interests and the adviser, the
licensee or the authorised representative.
This legislation also extends the obligation from the
licensee to the adviser to ensure the advice is
appropriate for the client and to warn if the advice is
based on inaccurate or incomplete information.
There are civil penalties for a failure to give appropriate
advice and to warn the client. Previously, these
penalties were criminal.
Licensees now must take reasonable steps to ensure
their representatives comply with the obligation to give
appropriate advice only.

Conflicted remuneration and other banned

remuneration
This legislation banned licensees from receiving
conflicted remuneration i.e. remuneration that could
reasonably be expected to influence the financial
product advice or recommendations given to retail
clients. The ban includes both monetary and non-
monetary (soft dollar) benefits. The ban on conflicted
remuneration does not apply to the monetary benefits
from specific areas including certain insurance and
execution-only services. The ban also does not apply to
non-monetary benefits under a prescribed amount or
from specific areas including certain
 insurances, execution-only services, education, training
and information technology. Further, product issues or
the sellers are not allowed to provide conflicted
remuneration.
This legislation has also impacted volume-based
remuneration. Platform operators will be banned from
providing volume-based rebates. Volume-based fees
that are given to secure shelf space must not be
accepted by licensee or platform operators.
Asset-based fees on borrowed amounts must not be
charged to retail clients by advisers.

Corporations This Bill was not passed by Parliament. Many of the After FOFA was introduced, many reforms Corporations Amendment
Amendment changes proposed by this Bill have been introduced were passed through Parliament to (Streamlining of Future of
(Streamlining of through the regulations and the Corporations reduce the burden of compliance on the Financial Advice) Bill 2014 –
Future of Amendment (Financial Advice Measures) Act 2016. financial services industry. These changes Parliament of Australia
Financial Advice) were made to reduce compliance costs
Bill 2014 and whilst maintaining consumer protections.
The government was seeking to reduce
Corporations compliance costs as they believed FOFA
Amendment put an unnecessarily high burden on the
(Streamlining of financial service industry. These
Future of
amendments were made in response to
Financial Advice) the Dissenting Report by Coalition
Regulation 2014 members of the Parliamentary Joint
Committee (the Dissenting Report).

This regulation made amendments to the area of conflict

remuneration. Some of these amendments relate to
Corporations stamping fees, education and training in conducting a
Amendment
financial service business and non-platform operator.
(Revising Future For example, if a stamping fee is given to facilitate an
of Financial approved capital raising, the monetary benefit received Corporations Amendment
Advice) is not conflicted remuneration. (Revising Future of Financial
Regulation 2014 Advice) Regulation 2014

Corporations This regulation made amendments to grandfathering Revised explanatory

Amendment arrangements, benefits permitted under conflicted memoranda:
(Statement of remuneration and extended renewal periods for https://parlinfo.aph.gov.au/parlInf
Advice) accountant certificates. o/download/legislation/ems/r5208
Regulation 2014 _ems_beef5a10-bf35-477c-87b9-
(SOA 6280f39b61d0/upload_pdf/39788
Regulation) 4_Revised%20EM.pdf;fileType=a
pplication%2Fpdf

Corporations This regulation made amendments to the best interest https://www.legislation.gov.au/De

Amendment duty test. In particular, this amendment explained how tails/F2015L00969
(Financial the duty operates in relation to basic banking products
Advice) and general insurance products.
Regulation 2015

Corporations Ongoing fee arrangement Corporations Amendment

Amendment (Financial Advice Measures) Act
(Financial Advice 2016
Measures) Act This Act removed the opt-in requirement so that clients
2016 do not need to renew their ongoing fee arrangement
with their adviser every two years. Here, the adviser
does not have to obtain the client’s consent to charge an
ongoing fee.

Fee disclosure statements only need to be provided to

clients who entered into their arrangements after 1 July
2013. Advisers have 60 days to provide fee disclosure
statements which is a longer amount of time. Previously,
advisers had 30 days to provide fee disclosure.

Best interests obligations

The ‘catch all’ provision in the list of steps that satisfy
the best interest obligation has been removed. This
provision was paragraph 961B(2)(g) which required
providers to prove they have taken any other steps that
would reasonably be regarded to be in the client’s best
interest.

Further, this Act sought to better facilitate scaled advice

through giving greater certainty of the adviser’s best
interest obligation. Here, clients and advisers can agree
on the scope of scaled advice. Then, the adviser is only
required to investigate the objectives, financial situation
and the client’s needs in relation to that scope.

Conflicted Remuneration and other banned

remuneration
There is still a ban on conflicted remuneration on
personal advice. However, this Act has clarified the
definition of conflicted remuneration. For example,
benefits on general advice now will not be considered
conflicted remuneration in certain situations.

Statement of Advice

This Act also made changes to Statement of Advice

requirements. These amendments require advisers to
provide additional disclosure and information about the
existing rights of the client and obligations of the
adviser.

There were also changes to the documentation

requirements of advice. The Statement of Advice needs
to be signed by the providing entity (or an individual on
behalf of the providing entity) and the client. If a client
seeks further or varied advice, the client’s instructions
 need to be in writing, signed by the client and
acknowledged by the providing entity.

2017 Financial Corporations Education and training standards These changes were made in response to Corporations Amendment
Adviser Amendment the Financial System Inquiry and the (Professional Standards of
FASEA (the standards body) sets the degree,
Standards (Professional Parliamentary Joint Committee on Financial Advisers) Bill 2016 –
and Ethics Standards of professional year, exam and continuous professional Corporations and Financial Services Parliament of Australia
Authority Financial development requirements for financial advisers. Inquiry. The Inquiries determined that the
(FASEA) Advisers) Act To provide personal advice to retail clients on financial professional, ethical and education
2017 products individuals have to satisfy 3 conditions. These standards of the financial services Second reading speech
three conditions include a bachelor or higher or industry needed to be lifted to improve https://parlinfo.aph.gov.au/parlInf
equivalent qualification, an exam and at least one year competency and professionalism. The o/search/display/display.w3p;que
of work or training. Licensees need to ensure their previous framework was problematic as ry=Id%3A%22chamber%2Fhans
providers are complying with the continuous many advisers lacked competence, ardr%2F9b169b3b-768b-49e5-
professional development requirements. transparency and accountability because aabb-
advisers only provided advice that met the ed05f3ce0ebb%2F0005%22
This Act also detailed how individuals with overseas minimum standard. The aim of lifting the
qualifications can satisfy the degree requirements and standards of the industry was to create an
the meaning of a provisional relevant provider. A environment where customers are treated Memoranda
provisional relevant provider has met the qualifications fairly when receiving financial advice.
https://parlinfo.aph.gov.au/parlInf
and the exam conditions but is still undertaking their
professional year. o/download/legislation/ems/r5768
_ems_c6b53b56-1756-4e41-
The industry has had many instances of 8010-
inappropriate behaviour. This 03cfca59ab6f/upload_pdf/605981
The use of the terms financial planners and financial inappropriate behaviour hindered the .pdf;fileType=application%2Fpdf
advisers are restricted to individuals that have a degree, provision of advice as consumers did not
passed an exam and have completed their professional trust the financial industry. This lack of
year. trust was demonstrated by only 1 in 5
Australians seeking financial advice at the
time of the Bill being drafted. Further,
Ethical standards when individuals were asked to rate
financial advisers for being ethical and
This Act required relevant providers to comply with the
honest, only 25% gave a rating of high in
Code of Ethics. Previously, there were no ethical
a State of the Nation Report.
standards.
ASIC approves schemes that monitor and enforce
compliance with the Code. Monitoring bodies are in
charge of monitoring and enforcing compliance with
these schemes. These monitoring bodies conduct
investigations and notify licensees and ASIC of failures
to comply.
An independent person must review the scheme and
publish the review publicly (every 5 years).
 Register of relevant providers
This Act required licensees to provide more information
to ASIC when an individual becomes a relevant
provider. This additional information includes the
provider’s principal place of business, education
qualification, membership to a professional association
with an approved scheme and the name of the scheme.
The licensee also needs to notify ASIC if the provider is
a provisional relevant provider and when they started
their professional year.
If a provider fails to comply with their continuous
professional development or the code, the licensee must
notify ASIC.
Similarly, ASIC must maintain the register of relevant
providers with the required information.
The standards body
The Act empowers the Minister to declare a
Commonwealth company limited by guarantee to be the
standards body. This body sets the educational
standards and the Code through legislative instruments.
The body will also approve foreign qualifications.
The Minister may give the body written direction if it is
not complying with its obligations. Further, the Minister
may declare in writing that the nominated company is no
longer the standards body.
Transitional provisions for existing providers
For providers that have provided personal advice to
retail clients between 1 January 2016 and 1 January
2019, there is a special transitional arrangement.
If an existing provider does not pass the exam or meet
the degree requirements they can no longer be a
relevant provider. These existing providers, like the new
relevant providers, need to meet the continuous
professional development requirement and comply with
the Code.

Royal Financial Sector Reference checking and information sharing This Act was introduced in response to
Commissio Reform (Hayne the Royal Commission’s
2020-21 n Royal This legislation introduced extra obligations for financial recommendations and seeks to restore https://www.aph.gov.au/Parliame
implementa Commission services licensees to conduct references checks and trust and confidence in the Australian ntary_Business/Bills_Legislation/
tion Response) Act share information. financial system. Bills_Search_Results/Result?bId
2020 =r6630
ASIC has the power to make legislative instruments to
define the scope of reference checking and information
sharing obligations. If licensees do not uphold these
obligations, they are subject to a civil penalty. Qualified This Act created protocols for reference https://www.legislation.gov.au/De
tails/C2020A00135
privilege can be invoked as a defence by the licensees if checking and information sharing to
defamation or breach of confidence action is brought for ensure employers are made aware of a
the sharing of information. financial adviser’s past misconduct. This
Second Reading Speeches:
Breach reporting and remediation means that a financial adviser’s
misconduct cannot be hidden when they https://www.aph.gov.au/Parliame
Previously, licensees only needed to report significant change employment. ntary%20Business/Bills%20Legis
breaches or breaches that were likely to be significant. lation/Bills%20Search%20Result
Investigations did not need to be reported. The changes s/Result/Second%20Reading%2
have clarified and strengthened the breach reporting Further, the Act seeks to strengthen the 0Speeches?BillId=r6630&Page=
regime. These changes have expanded the situations breach reporting regime for financial 1
that need to be reported to ASIC. Reportable situations services licensees to ensure more
now include investigations into significant breaches that conduct is reported promptly and ASIC
have occurred or will occur which are taking longer than has the powers to enforce the regime. https://parlinfo.aph.gov.au/parlInf
30 days (and the outcome of those investigations), Breach reporting was inconsistent as it is o/search/display/display.w3p;que
conduct that constitutes gross negligence, serious fraud based on the licensee’s judgement that ry=Id%3A%22chamber%2Fhans
or misleading or deceptive conduct. Another reportable the breach or likely breach was ardr%2Fec2026d9-e105-4ff5-
situation is where there are serious compliance significant. 98da-
concerns about a financial adviser operating under a 5142f8424283%2F0011%22
different licence. These situations add another test for
significant breaches. Previously, the test for a significant Financial services licensees now are
breach was based on factors listed in the legislation. required to investigate misconduct of https://parlinfo.aph.gov.au/parlInf
Therefore, there are now two tests for significant financial advisers and to provide o/search/display/display.w3p;que
breaches. remediation to clients who have been ry=Id%3A%22chamber%2Fhans
The legislation introduced a time requirement of 30 damaged by misconduct. This change ards%2Ffd2295d6-3f93-487a-
calendar days for the licensee to make a report when was made as consumers were not 95ba-
they first knew of the breach to ASIC. Further, the receiving prompt and effective ab6d5334b30f%2F0228%22
licensee must make a report to ASIC if they were remediation.
reckless in recognising reasonable grounds to believe a
breach had occurred.
This legislation requires ASIC to prescribe the form of
the reports and publish the report data. A failure to lodge
a report within the 30-day timeframe is an offence with a
maximum penalty of two years imprisonment and/or a
fine.
Investigating and remediating misconduct
 There are two limbs to this change. Firstly, when
misconduct is detected, the licensee must inform
affected clients within 30 days and investigate the nature
and full extent of the misconduct within a reasonable
amount of time. This investigation should identify the
loss or damages to the client that has or will occur. The
second limb takes place after the investigation. The
licensee must inform the impacted client of the nature
and full extent of the conduct within 10 days and
remediate the client’s losses within 30 days.
Licensees are now required to maintain records to
demonstrate they have complied with their obligations to
notify the client/consumer, investigate and remediate
misconduct.
Licensees who fail to comply with these obligations are
subject to civil penalties. Significantly, licensees who fail
to maintain records of compliance with the obligations
are subject to criminal penalties.

Financial Sector This legislation has made amendments to: This Act was implemented to fulfil the Financial Sector Reform (Hayne
Reform (Hayne Banking Royal Commission’s Royal Commission Response
Royal • Corporations Act 2001; and recommendations of 2.1, 2.2, 3.2 and 3.3. No. 2) Act 2021:
Commission
• Superannuation Industry (Supervision) Ultimately, these changes are seeking to Legislation:
Response No. 2) restore trust and confidence in the
Act 1993. https://www.legislation.gov.au/De
Act 2021 financial system.
tails/C2021A00019
Ongoing fee arrangements
Under the new law, fee recipients who participate in
The Commission highlighted the issues of
ongoing fee arrangements must provide fee disclosure
fees being charged when no service was
statements to their clients during the same period each
provided. These fees were charged due to Explanatory memoranda:
year. Here, the renewal period begins and ends at the
the desire for profit and the ability to https://parlinfo.aph.gov.au/parlInf
same time each year.
deduct fees invisibly. These practices o/download/legislation/ems/r6654
The fee disclosure statement must include the fees that were problematic as consumers were _ems_fbe7be0f-10c5-44d5-808c-
will be charged, the services the client is entitled to charged fees on an ongoing basis without c87ffb6b2960/upload_pdf/JC000
receive and must request for annual renewal of all their consent. Therefore, the Commission 726.pdf;fileType=application%2F
ongoing fee arrangements. Importantly, the client’s recommended an enhanced ongoing fee pdf
written consent is required before a fee under an arrangement framework.
ongoing fee arrangement can be charged. This means
that renewal is required annually (rather than every two Second reading speech:
years under the old law). Further, the new obligation for a financial
adviser to disclose when they are not https://parlinfo.aph.gov.au/parlInf
Disclosure of lack of independence o/search/display/display.w3p;que
independent ensures consumers are
better informed about their financial ry=Id%3A%22chamber%2Fhans
 Previously, there was no obligation to disclose when adviser’s conflicts. This new obligation ardr%2F8d35ad3a-06a6-4b15-
these entities were not acting independently. was required due to some financial b4bc-
advisers being biased, not independent d5f91eeb30c9%2F0041%22
However, financial services licensees or authorised and not impartial when providing advice.
representatives who are not giving independent advice
are required to give retail clients a written statement
disclosing their lack of independence. This statement Reasons explained in-depth:
must be given before personal advice is provided and is The changes to advice fees in https://www.aph.gov.au/Parliame
superannuation were made due to many ntary_Business/Bills_Legislation/
a requirement in the Financial Services Guide. These
entities are not acting independently if they are using providers charging fees when no service bd/bd2021a/21bd046
was performed. Clients also had little
restricted words improperly including independent,
impartial and unbiased. visibility of when the fees were charged.
This means that members of these
Advice fees in superannuation superannuation products were not aware
and did not provide informed consent
Previously, superannuation trustees were allowed to when fees were deducted. Therefore,
charge a fee under an ongoing fee arrangement. Under these members needed greater protection
the new law, there is a prohibition on superannuation to ensure they can make informed
trustees charging member fees for advice unless the decisions.
member has entered into an agreement, consented to
the fee being charged per the agreement, and the
trustee has the consent of the member. This is known as
the general fee rule. Advice that can be collectively
charged does not require consent such as intra-fund
advice.
A fee charged under an ongoing fee arrangement
cannot be charged to a MySuper product by the
superannuation trustee.

Financial Sector This Bill will reform: These changes have been made to fulfil Financial Sector Reform (Hayne
Reform (Hayne the Banking Royal Commission’s Royal Commission Response—
Royal • Australian Securities and Investments recommendation 2.10 which relates to Better Advice) Bill 2021
Commission Commission Act 2001 establishing a new disciplinary system.
Response—
• Corporations Act 2001
Better Advice) Bill:
Bill 2021 • Freedom of Information Act 1982 The Commission made this https://parlinfo.aph.gov.au/parlInf
recommendation because there was no o/download/legislation/bills/r6740
• National Consumer Credit Protection effective system of professional discipline _first-
Act 2009 for financial advisers. This system was not reps/toc_pdf/21081b01.pdf;fileTy
effective as it was not cost-effective, pe%3Dapplication%2Fpdf
• Tax Agent Services Act 2009
provided too many pathways for
consumer complaints, and ASIC’s powers
were limited to serious sanctions. As Explanatory memoranda:
Single Disciplinary Body ASIC’s powers were limited to only https://parlinfo.aph.gov.au/parlInf
serious sanctions, less serious offences o/download/legislation/ems/r6740
ASIC’s Financial Services and Credit Panel will operate were not disciplined leaving consumers _ems_83a55868-1aef-4604-
as the disciplinary body for financial advisers. Here, vulnerable to exploitation. 8573-
ASIC is required to convene a panel if they reasonably 4d067ea31f74/upload_pdf/JC002
believe a financial adviser has breached their obligations 757.pdf;fileType=application%2F
under the Corporation Act. These reforms seek to improve access to pdf
The panel is given a broader range of powers. financial advice and make the oversight
Previously, ASIC could only make banning orders for process more efficient.
serious breaches. Under the new law, the panel has the
power to give warnings or reprimands; take Second Reading speech:
administrative action through making an instrument; https://parlinfo.aph.gov.au/parlInf
make an infringement notice, or make a o/search/display/display.w3p;que
recommendation for ASIC to apply to the court for a civil ry=Id%3A%22chamber%2Fhans
penalty. ardr%2Feb97f924-9ac6-4ef0-
Registration of financial advisers a3d7-
0b15830be9b1%2F0039%22
Previously, a financial services licensee would authorise
a person to provide financial advice on their behalf.
Under the new law, the registration of financial advisers
has two stages. In stage 1, the financial services
licensee is required to register their financial adviser
through an application to ASIC. Stage 2 is completed by
the financial adviser who registers themselves with the
registrar on a yearly basis.

FASEA
Previously, the Minister could use a legislative
instrument to establish a standards body (FASEA). This
standards body determined the standards for financial
planners and assigned the exam administrators.
Under this Bill, FASEA will wind up and its
responsibilities will be transferred to the relevant
Minister. The Minister will perform the standard-setting
function. ASIC will be responsible for administering the
financial adviser exam.
Regulation of tax (financial) advisers
Previously, financial advisers who provided tax
(financial) services had to meet many requirements
under the Tax Agent Services Act 2009 and
Corporations Act 2001.
Under this Bill, tax (financial) advisers will only be
regulated under the Corporations Act and not by the
Tax Practitioners Board. This means that registered tax
agents or a financial adviser that have met the additional
education and training standards are the only people
able to give tax (financial) advice.
APPENDIX 3: FPA response to Australian Small Business and Family
Enterprise Ombudsman Inquiry into Insurance. 28 August 2020

Overview of the financial advice profession

To understand the practices of the insurance industry impacting small financial planning businesses and
whether insurance products are fit for the purposes of small financial planning business, the structure of
the financial advice market and licensing regime must be considered.

Regulatory overview of financial advice

A financial planner (also known as a financial adviser) is a person or authorised representative of an
organisation licensed by ASIC to provide personal financial advice.
Financial advice is regulated under the Corporations Act 2001 (Cth) as ‘financial product advice’. A
financial planner must either hold an Australian Financial Services Licence (AFSL) or provide financial
advice as a representative of an AFSL holder (a licensee).
A financial planner is often referred to as a ‘representative’. A ‘representative’ of an AFS licensee is:
• An ‘authorised representative’ of the licensee;
• An employee or director of the licensee;
• An employee or director of a related body corporate of the licensee.
AFSL holders are subject to general licensee obligations, conduct and disclosure obligations as well as
additional obligations for providers of financial product advice to retail clients. There are also some
obligations that apply directly to representatives.
Financial planning is also regulated under the Tax Agent Services Act 2010 as a tax (financial) advice
service. A tax (financial) adviser must be registered directly with the Tax Practitioners Board (TPB) or an
individual must operate within a registered business under the supervision of an individually registered tax
(financial) adviser.
The financial planning profession is highly regulated. In the near future one piece of personal financial
advice will be regulated by 9 regulators - ASIC, TPB, AUSTRAC, Office of the Australian Information
Commissioner (Privacy), APRA, ATO, FASEA, the ACCC (under the consumer data rights framework) and
the new statutory financial adviser disciplinary body[1] - all administering Acts and regulatory requirements
imposing different compliance requirements on financial planners. In addition, the same piece of advice will
have oversight and interpretation by the Courts, the Australian Financial Complaints Authority (AFCA),
Australian financial service licensees and professional bodies such as the Financial Planning Association.

Market overview
The personal financial advice market consists of approximately 2,155 licensees and 21,743 financial
planners registered on the ASIC Financial Adviser Register (FAR).[2]
The structure of the advice market is unique - it has a large number of small businesses who hold and
operate under their own AFSL, however there is also a large number of small business financial planning
practices that are authorised and operate under the AFSL of a large dealer group. Such dealer groups may
also have employed advisers.
The following information on the concentration of the Australian financial planning industry shows the high
proportion of small licensees operating financial planning businesses and changes in the market over the
past three years.
 October August
2017[3] 2020[4]

Percentage of advisers (both aligned and non-aligned) operating under a 44% 35%
licence controlled by the largest 10 financial institutions;

Percentage of total (including aligned and nonaligned) advisers operating over 35% 21%
under a licence controlled by 6 financial institutions – the four major banks,
AMP and IOOF Holdings

Percentage of the total number of financial advisers on ASIC’s Financial 30% 7%

Advisers Register who work for one of the major banks

Percentage of advice licensees operating a firm with less than 10 financial 78% 89%
advisers.

Percentage of advice licensees with less than 50 advisers, 90% 96%

Percentage of advice licensees with less than 100 financial advisers. 95% 98%

Average number of financial advisers operating under an AFS licence 34 20

individuals. individuals

Business models
The licensing regime has led to the development of a variety of business models in the advice profession.
Dealer groups
Financial planners can operate in advice groups (also known as dealer groups or licensees). Under this
structure, a corporate entity in the group will hold an AFSL, permitting the financial planners who are
members of the advice group to operate as its authorised representatives and provide financial advice to
consumers on its behalf.
Such financial planners provide financial advice to consumers under both the AFSL and the commercial
brand of the dealer group and/or their own business trading name. In return, dealer groups provide their
members centralised back office services and support.
Aligned/non-aligned
Financial planners (and dealer groups) can be classified as either being independent, non-aligned, or
aligned with a financial institution, such as a bank, financial product provider, or a wealth management
services provider.
For aligned financial planners, the alignment can occur in various ways, including via vertical ownership
structures, contractual relationships, and permitted benefits.
Business model examples
• Large licensees will have multiple (some as many as 60 or more) practices (small businesses)
located across Australia operating under one licence; some large licensees have both employed
planners and corporate authorised representatives operating under their licence.
 • Corporate authorised representatives are authorised under a licensee and employ planners
(authorised representatives) to provide advice under their corporate authorised representative
status.
• Small or boutique licensees are often one or two financial planners or a collective of several
corporate authorised representatives operating a small business under their own licence
• Authorised representatives are commonly sole traders operating a small financial planning practice
under the licence of a large or medium licensee.
• Employed planners

Professional indemnity insurance

Issues related to professional indemnity insurance may be unique to the financial planning profession and
other financial services.
Section 912B of the Corporations Act 2001 requires an AFS licensee providing financial services
(including providing financial product advice) to retail clients to have arrangements in place for
compensating clients for loss or damage suffered arising from breaches of the licensee’s relevant
obligations under the law, either by the licensee or its representatives.
To meet the client compensation arrangements under s912B, Corporations Regulation 7.6.02AAA states
that the licensee must hold adequate professional indemnity insurance cover.

What is Professional Indemnity insurance?

Professional indemnity (PI) insurance is a commercial product available to financial services providers
(amongst other professionals) to protect them against liabilities incurred in the course of operating their
business. It has been described as ‘a product that indemnifies professional people ... for their legal liability
to their clients and others who relied on their advice or services. It provides indemnity cover if a client
suffers a loss, material, financial or physical, that is directly attributed to negligent acts of the
professional’.
There is a legal requirement for the professional indemnity insurance cover held by financial planning
businesses to be ‘adequate’, including providing cover for liability under any awards by external dispute
resolution (EDR) schemes.
The main policy objective for the ‘adequate’ professional indemnity insurance requirement is to ‘reduce
the risk that compensation claims to retail clients cannot be met by the relevant licensees due to the lack
of available financial resources’. However, the structure, purpose and role of PI insurance is to cover the
insured (ie. the financial planner), not the third party consumer (client of the financial planner). Licensees
exiting the financial advice industry are also required to ensure adequate ‘run-off’ insurance is in place for
the advice that was provided under their licence to cover for potential future claims.
Regulatory Guide 126 (RG126) sets out ASIC’s view on the features a professional indemnity insurance
policy should have in order for it to be adequate in terms of:
• minimum requirements and features including:
o a limit of indemnity of at least $2 million and up to $20 million (based on revenue)
o cover (and no exclusions) for breaches of obligations under Chapter 7 including liability:
under external dispute resolution (EDR) scheme awards; for fraud or dishonesty by
directors, employees or representatives
o excess amounts at a level that the licensee can confidently sustain
o cover of legitimate switching from funds or products that are not on an approved product
list to another fund or product on the approved product list
 o defence costs (typically these are in addition to the limit of indemnity), and
o retroactive cover.
• factors that licensees should consider when determining what is adequate for them including the
nature, scale and complexity of the business and the licensee’s financial resources, as well as the
maximum liability that might be incurred.

Who holds the Professional Indemnity cover?

Traditionally AFS licensees have complied with this obligation by holding PI insurance cover for all the
financial products and services provided under their licence, including financial advice provided by
financial planner representatives. However, changes in the advice and PI insurance markets have seen
the emergence of other mechanism for meeting the PI requirement including:
• Licensees requiring authorised representatives to take out their own PI policy – this means
authorised representatives who operate a small financial planning business must hold a PI policy
directly.
• Licensees charge a separate fee for PI cover on top of the licensee fee charged to authorised
representatives operating a small financial planning business.
These emerging options that larger licensees are using to meet their legal obligations are exacerbating
the PI insurance issues for small financial planning businesses.
Small financial planning licensees are continuing to grapple with the significant issues associated with PI
insurance on an annual basis. As it is a condition of the AFS licensing regime to hold such a policy,
issues with PI insurance arrangements mean that a small self-licensed practice owner faces the loss of
their business, their licence and potentially their chosen profession if they cannot secure the legally
mandated adequate cover.

Issues related to professional indemnity insurance

The excessive cost of PI insurance is intertwined with the availability of PI insurance for financial advisers
in Australia, and policy exclusions.
Common PI insurance issues for small financial planning businesses include:
• High premiums
• Lack of market competition as insurers exit the Australian market
• Exclusions
• Increasing excess
• Claims experience and expenses
• Licensees excluding PI cover from standard licensee fees and charging it as a separate cost or
requiring financial planning practices to secure their own PI cover
These issues are covered below in response to the Terms of Reference of the Inquiry.

Professional Indemnity Insurance and the Inquiry Terms of Reference

That the Australian Small Business and Family Enterprise Ombudsman inquire into and report on
practices of the insurance industry impacting small business and whether insurance products are fit for
the purposes of small business, with particular reference to:
1. the availability and coverage of insurance policies provided to small businesses including:
• the impact of coverage denial;
Financial planning businesses must hold adequate PI insurance as a condition of their financial
advice licence and legally are not be permitted to provide financial advice to retail clients without such
cover. A small self-licensed practice owner faces the loss of their business, their licence and
potentially their chosen profession if they cannot secure the legally mandated adequate cover.
• policy exclusions and how they are communicated to small businesses;
Financial planning businesses generally purchase professional indemnity insurance through an
insurance broker. The broker’s role includes determining if the policy offered will provide adequate
cover in line with the requirements in RG126 and for the risk of the business, and to help the financial
planning business understand policy wording, definitions, exclusions and excesses.
Feedback from some FPA members indicates that brokers do not always explain the policy
exclusions unless specifically asked to by the financial planning firm.
Concerns have also been raised about time pressures placed on small financial planning businesses
by insurers to consider and agree to policy changes and pricing when taking out a new policy and at
renewal in a restricted timeframe. Some small financial planning businesses have stated that they
have agreed to renewal offers as it is a legal requirement to hold PI insurance even though the offer
expiry time provided by the insurer did not allow adequate time to truly understand the policy given
the complexity of the wording and definitions and the need to ensure exclusions do not put the
business at risk of inadequate cover.
There is also apparent inconsistency across PI policies regarding defence costs – some policies
include defence costs; others exclude defence costs.
• the use of definitions in policy documents that create de facto policy exclusions;
The complexity of the wording and definitions of PI policies can result in misunderstandings of the
coverage with exclusions and issues only being clearly identified during the claims process.
• the fitness for purpose of market offerings;
When determining whether professional indemnity insurance for financial planning businesses is ‘fit
for purpose’ it is important to consider the role PI insurance is mandated to play in relation to
financial advice. Under s912B of the Corporations Act the primary purpose of requiring licensees to
hold PI insurance is to ensure funds are available to pay compensation awarded by AFCA, or other
jurisdiction, to a client of the firm should a complaint arise; or if a licensee provides compensation to
a client directly as a result of an internal investigation.
However, there are significant limitations in using professional indemnity insurance as a consumer
compensation mechanism, including:
▪ the total funds available under a policy may not cover all of the compensation
awarded against the insured;
▪ the policy may not cover the conduct which gave rise to the order for
compensation – for example, if the advice recommended a product that was
excluded under the policy wording even if the advice and product
recommendation was in the best interest of the client as required under s961B of
the Corporations Act and the legislated Financial Planner and Financial Adviser
Code of Ethics;
▪ the complex policy wording can lead to financial planning firms holding
inaccurate expectations of cover being adequate for the risks of their business
and the requirements in RG126, leading to claims being denied;
▪ the involvement of insurer’s lawyers in the claims process can make it too costly
and time consuming to pursue legitimate claims, particularly by small financial
planning firms;
▪ the amount of compensation payable may be less than the policy’s excess; and
 ▪ the claim is outside the terms of the cover – for example where a single claim
exceeds the limit of the cover, or where a financial planning business
experiences multiple claims in a single year of cover – this significantly
undermines the performance of the cover and whether it is fit for purpose.
Policy exclusions can significantly impact the performance of the cover in terms of paying
compensation to consumers and covering complaint costs of the small business.
Insurance premiums have been escalating rapidly, regardless of whether a practitioner has been
subject to a complaint or a finding from an external dispute resolution process. Insurers are leaving
the market. Some financial planning businesses are finding it very difficult to renew their
professional indemnity insurance and taking out new cover has become problematic.
The role of PI insurance is to cover the cost to the financial planning business of compensation
awarded to consumers by dispute jurisdictions. The substantial increases in excesses attached to
PI policies particularly over the past two years, and the involvement of legal representation in the
claims process (as discussed below), significantly undermine the value of the insurance for the
business insured.
Relevant to the consideration of whether PI insurance for financial planning businesses is ‘fit for
purpose’ is the identification and assessment by insurers of the risk to be covered.
There has been an increasing number of exclusions in the PI cover available to financial planning
businesses, often with no reduction in premium. There is a concern that underwriters do not present
a good understanding of how to assess and price risk in the financial advice industry.
Anecdotal evidence from small financial planning licensees indicates that there is a lack of
explanation of how the insurer’s assessment parameters work, with no clear guidelines on the risk
levels or how to reduce the risk being underwritten. It is unclear what the insurers are looking for in
determining the level of risk the business presents. The questions asked by underwriters commonly
relate to product failures that are not the responsibility of financial planning firms; rather than the
potential risk of breaches of financial advice laws, non-compliance with conduct requirements, and
consumer complaints in relation to the financial advice provided.
It appears that insurers do not differentiate the risk presented by large licensees with large numbers
of authorised representatives, and small financial planning licensees with one to five representatives
authorised and providing financial advice under their licence. Small financial planning firms have
been informed by insurers that large premium increases are due to the broader market.
Anecdotal feedback from FPA members also indicates that insurers focus on assessing risk and
providing financial planning businesses with cover based on the financial product recommended to
clients, not the appropriateness of the financial advice provided to clients. For example, recent
exclusions include products such as managed investment schemes, mezzanine finance, unlisted or
unrated securities, unsecured loans and property developments. The PI insurance exclusions can
commonly contradict the licensee’s Approved Products Lists, and ignore the legal requirement for
financial planners to provide advice in the best interests of their client.
There have been significant changes to the regulation of the financial advice profession over the past
decade including the introduction of a best interest duty to the client, the banning of commissions,
and education and professional standards. It is unclear how these changes have been incorporated
into insurers risk assessments for PI insurance for financial planning businesses.
A greater clarity of the risk assessment triggers used by insurers in relation to financial advice would
encourage financial planning firms to adapt their business models and advice processes to lower the
risk and streamline the insurance process.
2. other issues affecting availability and coverage including:
• any impact of the current market’s lack of diversity in insurance providers, underwriters
and types of insurance;
The most significant cost for financial planning businesses is professional indemnity (PI) insurance,
as required under the Corporations Act. While PI costs vary significantly depending on the financial
planning practice, prices are driven up by the lack of competition in the professional indemnity
insurance market for financial planners and licensees in Australia.
It is difficult to ascertain how many underwriters currently operate in the financial advice PI insurance
market in Australia. The FPA has been informed that across the globe all markets for all liability
classes are very difficult at present, with PI insurance for financial advice providers particularly limited.
There are mixed reports regarding the number of underwriters offering PI insurance for financial
advice providers in Australian.
The insurance market for PI insurance to financial planners continues to be difficult and unprofitable
for most insurers. As a result insurers/underwriters are leaving the space or increasing premiums to
ensure this market segment is profitable. Consequently, many financial planning firms, regardless of
their claims history, are being affected with the skyrocketing PI insurance premiums, policies with
multiple exclusions, and high excess amounts.
As a result of the declining competition in the market, insurers are being selective in the risk they
take on because there’s more demand and restricted supply. Those providers that remain have
been either increasing premiums, deciding not to renew, restricting coverage and/or increasing
excess amounts.
The lack of diversity and competition in the financial advice professional indemnity insurance market
significantly impacts the affordability and availability of appropriate cover. The small number of
underwriters offering PI cover in Australia exacerbates the power imbalance between the insurer
and the financial advice business seeking this mandatory insurance.
The impact of this issue will continue to be heightened for an increasing number of businesses due
to the movement in the financial advice market away from operating under large institution licensees
toward small AFS licence holders.

• insurance policy affordability and its impact on availability, including increases in

price that amount to denial of coverage;
The Inquiry Terms of Reference refers to “insurance companies…..pricing insurance policies out of
reach”. This is not an option for financial planning businesses as it is a mandatory legal requirement
for all financial planning providers to be covered by professional indemnity insurance, either by
holding the policy directly or by being covered by a licensee’s policy. This mandatory requirement
creates a power imbalance in the negotiation of policy inclusions/exclusions, excess amounts, and
price.
While the following APRA data is not specific to small licensees, it confirms significant year-on-year
increases in PI insurance premiums relative to the number of insured, and continuously rising
excess amounts, covering all financial advice licensees.
 Premium, number of risks and exc ess data for professional indemnity insuranc e of financ ial
advisors and planners by underw riting year

Median exc ess/

Underw riting Gross w ritten Number of risks Average w ritten
deduc table
year premium ($) w ritten premium ($)
amount ($)

2014 35,678,775 1,070 33,345 10,000

2013 23,767,027 1,199 19,822 10,000
2012 17,833,362 1,172 15,216 5,000
2011 17,400,597 1,092 15,935 2,500
2010 21,279,681 1,868 11,392 5,000
2009 18,520,090 2,206 8,395 5,000
2008 14,578,441 2,216 6,579 5,000
2007 15,337,124 2,463 6,227 5,000
2006 16,439,948 2,428 6,771 5,000
2005 * * 6,654 5,000

Source: A ustralian Prudential Regulation A uthority (A PRA ), National Claims and Policies Database

Notes:
(1) More information about the APRA National Claims and Policies Database is available here:
www.apra.gov.au/GI/Pages/national-claims-and-policies-database.aspx
(2) Data marked with * have been masked to maintain confidentiality and/or privacy
(3) Average written premium is gross written premium divided by number of policies
(4) Data for 2015 not available at the time this was produced, in August 2015
(5) See the notes page for a full explanation of the nature of the data provided
(6) See the glossary for an explanation of all terms used

For small financial advice licensees, PI insurance premiums cost approximately 2 to 3 per cent of
business revenue on average. Premiums are reviewed annually and in 99 per cent of cases,
increase year on year regardless of the claims history of the business.
In the past, the most common industry practice is for the licensee to hold the PI insurance policy as
part of the service package provided to their authorised representatives, and charge for this cover
via their licensee fee, as previously stated. However, there has been a shift in recent years to
authorised representatives (who run their own small financial planning business) either paying a
share of the licensee’s PI insurance premium separately, or the licensee requiring the authorised
representative to hold their own policy.
The following FPA member case study demonstrates the impact of this change:
My PI cost changed from being bundled within my licensee fee of $24,000 plus 3% of
revenue, to a separate charge of $10,900 (ex GST) in May 2019. The licensee fee was not
reduced with the removal of the PI cost, rather the licensee fee was increased and the
additional PI cost charged separately. This year the licensee has renegotiated the PI charge
to $5,824 pa. Next year will be negotiated again and may rise or fall depending on if any
events occur during the year.
In May 2020, the FPA conducted a PI insurance survey with our Professional Practices with 47% of
respondents stating that they had changed insurer at renewal with a significant increase in cost
given as the main reason for the change. For example:
Renewal is currently in progress. We haven't claimed in 13 years on PI, have no regulatory
action or major issues in the licence, but first $10m layer is going up 25%, co-insurer on the
first layer is currently wanting to go up 150%. 2nd layer wants to go up 400%. Currently in
negotiation with other insurers to find a reasonable answer. I will probably drop a layer just
to be able to afford it.
44% of survey respondents reported premium increases of between 10% and 24%; 18% received
increases between 25% and 50%; and 15% of respondents experienced an increase of 100% or
more.
Our broker tried everywhere to obtain cover but said had no other option to pay over double
of previous year ($21,000) to current year's premium ($45,622). We are a very small
advisory firm with only three advisers and no MDA [managed discretionary account
authorisation].
In addition, 44% of respondents stated they were required to accept a higher excess to obtain PI
cover in the last renewal period. Of those respondents who accepted higher excess amounts, 59%
experienced excess increases of between 20% and 50%; and 24% of respondents had an excess
increase of 100% and over.
Survey respondents offered examples of the excess in the PI cover held by some small financial
planning businesses:
• We initiated our own excess increase about 4 years ago to lower the premiums as they
were becoming prohibitive. Our excess is presently $100k on a revenue of circa $3mil.
No MDA, no adverse compliance history.
• Increased [this year] from $250k to $1m.
• Have had suggestions of excesses over $100 000 (current is $15 000) if we could find
an insurance company to offer cover.
• current models of government support or control in Australia and internationally that
facilitate affordable access to appropriate insurance for small businesses;
There are no models of government support or control in Australia that facilitate affordable
access to appropriate professional indemnity insurance for small financial planning
businesses.
The financial advice PI insurance market was built for large licensees. This is symptomatic of
the licensing regime and the bedding-down of the Australian Financial Services Licensing
(ASFL) regime under the Financial Service Reform Act 2001, and the emergence of the
financial planning profession in Australia.
Historically, AFS licences were held by large financial services institutions who authorised
financial planners to provide financial advice to consumers under their licence. The authorised
financial planners ran their own small financial planning business.
Due to this market structure and the FSR regime, the professional indemnity market and
offering from insurers was primarily designed for large financial services institutions - the value
for insurers was through the large licensee PI policy. It was not built for small businesses to
hold their own policy. This legacy has continued to stymie the PI offering for small businesses.
Regulatory instability due to continuous reforms in the financial advice space since the
implementation of the FSR in 2001, has added risk uncertainty for insurers and impacted
affordable access to appropriate PI insurance for small financial planning businesses.
• the role of brokers in getting the right coverage;
 A broker can assist in determining the appropriate cover for the specific needs of the business and
ideally present alternative policies for consideration. Any exclusions would usually be specified in
the policy schedule and the cover provided and not provided should be clearly explained by the
broker.
Most small financial planning businesses rely on the advice of insurance brokers. Unfortunately,
cover deficiencies can still come to light at claim time.
It is understood that of the hundreds of brokers in Australia who assist clients with PI cover, there
are only a handful who specialise in PI for financial advice businesses.
The size of the financial advice PI insurance market means there are very few underwriter options
for brokers to negotiate with. Brokers specialised in the PI market for financial planners tend to
know the detailed risk each underwriter will or won’t cover in relation to financial advice. This can
occasionally lead to confusion about who the broker is acting for – the insured or insurer – as the
broker will engage with the underwriter they know will cover the type of risk presented in each
financial planning firm.

3. the use of contract changes that have not been agreed to and their potential treatment as
Unfair Contract Terms;
The Unfair Contract Terms under the law do not apply to professional indemnity insurance.
Professional indemnity insurance does not meet the ‘standard form contract’ definition under
s12BK of the ASIC Act 2001, as demonstrated by Example 1.4 of the Explanatory Memorandum
to the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers
(2019 Measures)) Bill 2019:
BBB Limited is a small business seeking professional indemnity insurance. BBB Limited requests
that a broker recommend the best insurance policy. The broker, acting for BBB Limited, seeks
quotes from several insurers. In preparing the contracts, the broker negotiates changes to a
number of specific clauses to suit the nature of BBB Limited’s business. These contracts would
not be considered standard form contracts and BBB Limited, as the party to the contract, cannot
take action under the unfair contract terms regime.

4. the timeliness of payment of insurance payouts and the effectiveness of dispute

resolution frameworks for insurance disputes;
The Australian Financial Complaints Authority (AFCA) is an ASIC approved external dispute
resolution (EDR) scheme with the role of resolving consumer and small business complaints
about financial firms. Small financial planning businesses are financial firms and are required by
law to be a member of AFCA. AFCA does not consider disputes between financial firms.
Professional indemnity insurance is also excluded from the AFCA jurisdiction under its Rules as a
small business insurance product.
Disputes between small financial planning firms who hold PI insurance, and the insurer or issuer
of the insurance, are usually considered in the court system.
The purpose of PI insurance held by financial planning firms is to cover the cost of compensation
awarded by AFCA, or other jurisdiction, to a client of the firm should a complaint arise.
A significant issue for financial planning businesses experiencing a complaint at AFCA is that the PI
insurer takes over the management of the complaint on behalf of the business with seemingly
mandatory involvement of lawyers. This significantly drives up the cost of the complaint and the
resulting claim for the business, and can at times sour any misunderstanding between the financial
planner and client.
 Once the complaint is resolved by AFCA, the financial planning business files a claim in relation
to compensation awarded by AFCA to the complainant in the complaint. Risks can arise for small
financial planning businesses in the event of a claim, particularly in relation to policy exclusions,
unclear policy wording, and the unclaimable costs of essential legal representation in the claims
process.
This claims process is often drawn out and difficult, as demonstrated by the following case study
(provided by an FPA member):
A claim for financial loss by an AFSL under a ‘PI’ policy. An AFSL lodged a ‘fidelity’ claim with the
Insurer (via its insurance broker) with assistance of the AFSL’s lawyers due to the complexity of
the policy document. The claim resulted from the misconduct of an authorised representative
which was discovered by the licensee. AFCA was not involved in this case and the licensee
reported the breach to the relevant Regulator. The licensee arranged an independent
investigation of the matter and provided full remediation to all affected clients.
The insurer was domiciled overseas and responded through their Australian based lawyer after
several follow-ups with the broker. The insurer responded through its lawyers that the policy does
not cover the claim. The AFSL’s lawyers disputed this assertion and responded appropriately.
The insurer was again very tardy in responding and maintained its position and refused to
indemnify under the policy. The AFSL’s lawyers provided all necessary evidence and then
positioned to seek a ruling on the policy definition in the Federal Court if the insurer continued to
deny the claim.
After many months of legal debate between lawyers, the AFSL was successful in its claim.
Success was achieved only through perseverance and at significant legal cost in pursuing the
claim (which was not recoverable under the policy).
This is an example of unnecessary and significant costs incurred by an AFSL for a loss it believed
would be covered by the PI policy. Insurers’ tardiness and apparent methodology to delay claims
create significant legal costs for the insured that can discourage small businesses and AFSLs from
vigorously pursuing legitimate claims.
Claims experience case studies highlight the complexity of PI policies required by financial planning
businesses.

5. the effectiveness of relevant codes of conduct and legislation, including the adequacy of
applicable penalties; and
There are no codes of conduct that apply to professional indemnity insurance.
However, brokers are subject to the NIBA Insurance Brokers Code of Practice including when
providing broking services to small financial planning businesses. 29
The Code clarifies that insurance brokers who are engaged by the client are acting on behalf of
the client, not the insurer.
6. any other relevant matters.
No comment.

29
https://www.niba.com.au/codeofpractice/NIBA_Code_2014.pdf?v=2
Individual Disability Income Insurance (IDII)
What is individual disability income insurance (IDII)
Individual disability income insurance (IDII), commonly known as income protection (IP) insurance,
provides policy owners with a reasonable chance for them to reset their lives and recover in the event of
an injury or illness. IDII is often taken out by small business owners, sole traders, and those with family
owned businesses such as farmers.
APRA made changes to the rules for IDII which came into effect on 31 March 2020. The changes
included:
• Cease writing IDII policies that provide benefits based on an agreed value income and only offer
new policies based on current income at the time of claim.
• Limit benefits under new IDII policies to 100% of current income over the first six months and
75% thereafter, and set a cap on payments of $30,000 per month.
• Limit IDII policies to an initial term of five years, with renewal only after considering occupational
and financial changes.
The impact of these changes on policy holders include:
• For example, only offering IDII policies with benefits based on current income could
substantially disadvantage consumers who have variable income from year to year and lead to
these consumers not taking out IDII cover.
• Small business owners, farmers and contractors can have significant variations in their incomes
and their IDII cover could be de-valued if a claim coincided with a low-income year, despite
having paid premiums over the life of the policy.
The following examples demonstrate the impact of this change on small businesses.

Case study - small business:

For the last ten years, Jane has run her own tour guide business in Cairns. Jane’s business is highly
seasonal and subject to external shocks. She has had some good years with record tourist numbers
boosting her income. She has also had some poor years, particularly in the aftermath of Tropical Cyclone
Yasi, when few incoming tourists meant her business operated at a loss.
As a business owner, Jane is not covered by Queensland workplace compensation arrangements. Three
years ago, she took out IDII cover to protect her income in the event of a workplace accident and has
diligently paid her premiums for this policy. Jane had an accident at work that stopped her from working
for six months while she recovers.
With an agreed value policy, Jane can be confident that she will receive sufficient benefit from her policy
to cover her expenses while she recovers.
With a policy based on current income, Jane’s benefit would be highly dependent on how well her
business was performing in the period immediately before the accident.
• Any period of poor trading, including a broad tourism downturn caused by the coronavirus
outbreak, could dramatically reduce the benefit that Jane would receive.
• If Jane had reduced her hours at work immediately after her accident, in an effort to continue
working throughout her recovery, any later claim against her IDII policy would reflect her reduced
hours and lower income.
• Finally, Jane would need to provide evidence for her income for that period for any IDII claim,
which could be challenging if it does not align with personal tax returns.
Case study – farmer:
John owns and operates a broadacre farm near Dalby and mainly grows wheat and barley. John’s
income varies widely depending on the strength of that season’s crops and the prices he gets. In a good
year, John’s farm is highly profitable. However, since 2017 the drought has caused below average rainfall
and John’s income has been limited.
As John’s farm has low debt levels, he has been able to secure an IDII policy that will provide him with
$3,500/month of agreed value cover. If John were to be injured and unable to work, he would be
confident in the policy providing him with income support.
A policy based on John’s actual income, instead of an agreed value, would provide a benefit that was
highly dependent on whether the claim was made in a good or poor year for the farm.
• If the claim was made in a good year, the benefit would likely exceed John’s average income by a
considerable margin. If the claim was made in a poor year, it may not pay a benefit at all.
• Such variability would prevent John from adequately managing his risks and make him less likely
to commit to paying premiums when the possible benefit is uncertain.
Premium increases
As the new restrictions have only recently commenced it is currently unclear how the APRA changes will
impact IDII premiums and whether the cover is fit for purpose for small businesses.
However, the current COVID-19 pandemic and economic crisis is having an impact on the affordability of
IDII products. For example, insurer Onepath has significantly increased premiums:
Having earlier this year ceased agreed value and level premium IP [Income Protection] cover and
increased premiums for new customers, the insurer has gone a step further by foreshadowing a
25% increase in base premiums (both stepped and level) for existing customers.
It has also announced a 12.5% increase in premiums for new and existing customers with respect
to Total and Disability cover. 30

Cyber insurance
With the social distancing restrictions introduced to combat the COVID-19 pandemic and the move to
working from home for a large number of Australian businesses, there has been media reports and
warnings from governments and regulators of an increase in cyber threats to business.
The current environment has led to confusion about the different types of insurance policies offering to
cover the risks associated with cyber threats and potential data breaches, and the value of such cover for
small business on top of policies already held.

30
https://www.moneymanagement.com.au/news/liferisk/under-pressure-onepath-increases-ip-and-tpd-premiums-existing-customers
APPENDIX 4: FPA response to alternative general advice labels
proposed by ASIC (2019)

ASIC’s proposed Dictionary meanings FPA comment on proposed alternative

alternative label ‘general advice’ label

Choices/general Means there is a range of Oppose

choices/financial different things the
‘Choices’ does not make it clear that the
choices/product choices consumer can choose
from. representative providing the “choices” has not taken
into account the individual’s circumstances. Rather,
the word choices could imply that the
representative has in fact limited the range of
‘choices’ based on the individual’s circumstances. It
implies there may be more ‘choices’ that the
representative has assessed as not applicable to
the consumer.

Options/general One thing that can be Oppose

options/financial chosen from a set of
A consumer could interpret the ‘options’ provided
options/product options possibilities, or the
freedom to make a by a representative as not being general in nature
but have been purposefully selected based on the
choice. However it also
means that a person has individual’s personal circumstances.
to do a particular thing
because there is no
possibility of doing
anything else.

Guidance/general Something that provides Oppose

guidance/financial direction or advice as to a
The meaning and common/ lay person
guidance/product guidance decision or course of
action understanding of guidance has the same intent as
the meaning of ‘advice’ and therefore will not
The act of guiding or resolve the issues with the term ‘general advice’.
showing the way To guide someone is to provide assistance.
Assistance implies it is provided in the
individual’s interest to help them.

Information/general Information means “facts” Support

information/product and
Information is a clear term that consumers
information
“knowledge obtained understand does not take into account their
from investigation, personal circumstances.
study, or instruction”.

Suggestions/general The process by which a Oppose

suggestions/financial physical or mental state is
This label is ambiguous. It implies that the
suggestions/product influenced by a thought or
suggestions idea. ‘suggestions’ being provided are done so to help
the consumer, without clearly describing to the
An idea or plan that you consumer why the ‘suggestions’ are being offered.
offer for someone to
consider. It is commonly understood that when a
‘suggestion’ is offered to a person, it is done
so in order to help that person. Therefore, this
label is misleading as it implies the
‘suggestion’ has been personalised in some
way as it is intended to ‘help’ the consumer. It
 could lead the consumer to believe that the
representative providing the ‘suggestions’
thinks the ‘suggestions’ are relevant to the
consumer in some way and will help them,
particularly as the representative would likely
be more knowledgeable on the subject matter
of the ‘suggestions’ than the consumer.

Tips/general A tips is: Oppose

tips/financial
tips/product tips a piece of advice To provide someone with a ‘tip’ implies that
or expert or the person will miss out on something if they
authoritative do not act on the tip provided; that the ‘tip’ is
information about an opportunity with a high probability of
a positive and worthwhile outcome. It also
a piece of advance or implies that the ‘tip’ contains more detailed
confidential information and specialised information that other people
given by one thought to have not be privy to. This label could mislead
have access to special and confuse consumers and does not
or inside sources appropriately or accurately represent what
a useful piece of information ‘general advice’ is.
or advice, especially
something secret or not
generally known

Ideas/general An understanding, thought Oppose

ideas/financial or picture in your mind
The word ‘idea’ is ambiguous and can present
ideas/product ideas
A purpose or reason for slightly different meanings for different people.
doing something. A Its meaning is heavily influenced by the
formulated thought or interaction taking place. For example, a
opinion consumer may believe an ‘idea’ is “an
understanding, thought or picture in [the]
mind” of the representative based on the
consumer’s circumstances that the
representative is aware of. It is the opinion of
the representative that has been ‘formulated’
based on the consumer’s circumstances.
Therefore, it may mislead consumers into
thinking the ‘idea’ presented to them by a
representative is about them and has been
provided because it relates to the consumer’s
circumstances.

Pointers/general A helpful piece of advice or Oppose

pointers/financial information.
pointers The word ‘pointers’ is unusual and not
A useful suggestion or hint commonly used by people. It could therefore
about how to do or be easily misunderstood and inconsistently
understand something interpreted by consumers and industry as to
better the purpose or limitations of the ‘pointers’
provided.
A pointer to something
suggests that it exists or As its meaning suggests, it could also be
gives an idea of what it is misinterpreted as ‘advice’ and whether the
like. consumer’s personal circumstances have or
have not been considered.
A pointer is a piece of
advice or information which
helps you to understand a
 situation or to find a way of
making progress.

Guidelines/general Information intended to Oppose

guidelines/financial advise people on how
The word ‘guidelines’ is ambiguous. It has a
guidelines/product something should be done
guidelines or what something should specific meaning in business that it is sets
be. official rules that must be followed; whereas
outside the business context ‘guidelines’ may
Official instruction or advice be seen more as fluid suggestions that may or
about how to do may not be considered.
something.
A standard or principle by
which to make a judgment
or determine a course of
action.
Something that can be used
to help you plan your action
or to form an opinion about
something.

Hints/general Something that you say or Oppose

hints/financial hints do that shows what you
think or want, usually in a Implies the representative is not providing all
way that is not direct. the facts. As ‘hints’ are provided “usually in a
way that is not direct” it implies the ‘hints’ and
A piece of advice that helps the reasons they are provided may be
you to do something. secretive in some way, making it unclear that
the consumer’s circumstances have not been
considered.

Opinions/general A view, judgment, or Oppose

opinions/financial appraisal formed in the
opinions mind about a As explained above, consumers will most
particular matter likely disclose information about their personal
circumstances to a financial services provider
A belief stronger than in all the interactions they have with the entity
impression and less strong or person.
than positive knowledge
An opinion applies to a conclusion or
A formal expression of judgement about a particular matter. It is
judgment or advice by an therefore reasonable that a consumer could
expert misunderstand that a representative has
consider the consumer’s circumstances in
A belief not based on formulating the “conclusion or judgement” in
absolute certainty or order to provide the ‘financial opinion’.
positive knowledge but on
what seems true, valid or
probably to one’s own
mind.
An evaluation, impression,
or estimation of the quality
or worth of a person or
thing
Recommendations/ge Oppose
neral
The legal requirements for personal financial
recommendations/fina
ncial advice in the Corporations Act and ASIC’s
associated guidance, particularly in relation to
recommendations/pro
duct the best interest duty in s961B, specifically
recommendations/sal rely on the
es provision of ‘recommendations’ about financial
recommendations/mar products explicitly in relation to the
keting consumer’s circumstances. It would therefore
recommendations be inappropriate for this word to be used as
an alternative label for ‘general advice’ which
does not consider the consumer’s
circumstances.

Sales Talk between two or more Oppose

conversation/marketi people in which thoughts,
ng feelings and ideas are ‘Conversation’ implies the representative is
conversation/product expressed, questions are actively listening to the consumer and
responding with comments directly related to
conversation asked and answered, or
news and information is the information disclosed by the consumer
during that interaction. Hence it is highly likely
exchanged.
consumers would interpret the ‘product
A discussion with someone conversation’ to be relevant to their individual
about a particular subject circumstances and not general in nature.
Oral exchange of
sentiments, observations,
opinions, or ideas

Sales A conversation about Oppose

discussion/marketing something, usually
A discussion is defined as a conversation.
discussion/product something important.
discussion Therefore it presents the same issues as the
The activity in which people word ‘conversation’ as an alternative label for
talk about something and ‘general advice’.
tell each other their ideas or
opinions. However a ‘discussion’ is also considered
more “formal” than a ‘conversation’ and
The formal examination or “considers the pros and cons of the subject
consideration of a matter in matter” by “tell[ing] each other their ideas and
speech or writing opinion”, “in order to reach a decision”. This
implies that one party of a discussion is
Talk or writing in which pros involved in order to help another party make a
and cons or various aspects decision based on the opinions and ideas of
of a subject are the other party. That is, that one party, the
considered. consumer, is sharing information about
If there is discussion about themselves in relation to that subject matter.
something, people talk Hence it is highly likely consumers would
about it, in order to reach a interpret a ‘product discussion’ to be relevant
decision. to their individual circumstances and not
general in nature.
Statements/sales Something that is said, Oppose
statements/marketing especially formally and
Financial services providers have had long
statements/product officially
statements standing legal requirements placed upon them
An act or object that to provide consumers with ‘statements’ of
expresses an idea or their personal circumstances or assets as
opinion held or known by the entity. For example, a
bank statement, credit card statement, loan
A piece of paper that lists statement, and in relation to financial advice,
financial details A a Statement of Advice. These documents
declaration of matter of come with strict legal requirements which hold
facts penalties if breached.
An expression of Hence, consumers expect a ‘statement’ from
confidence or authority a financial services provider to be a formal,
official document relating to their personal
circumstances.
It would therefore be inappropriate for this
word to be used as an alternative label for
‘general advice’.

Sales The imparting or Oppose

communication/mark exchanging of information
eting communication by speaking, writing, or The term ‘communication’ is inappropriate as
using some other medium. it has specific and formal meaning in many
industries and businesses and therefore is
The process of sharing easily open to misinterpretation as to the
information, especially meaning of the label.
when this increases
understanding between
people or groups.

Presentation/sales A talk to a group in which Oppose

presentation/marketin information about a new
g presentation/product product, plane, etc., is The word ‘presentation’ has limited application
in relation to the breadth of situations in which
presentation presented
consumers may be provided with ‘general
An act of showing, advice’. It would be only be application to
describing, or explaining seminars as its meaning limits it application to
something to a group of one-on-one interactions a consumer may
people have with a representative, videos, newsletter,
and articles, for example. This meaning is
A formal talk in which you commonly understood.
describe or explain
something to a group of
people

Product Advertising is the business Support

advertising/product of trying to persuade people
marketing to buy products The FPA would support the label ‘product
advertising or product marketing’ in relation to
Marketing is the ‘general advice’ currently provided to sell
organisation of the sale of a products. However, we would prefer the label
product, for example, ‘product sales material’ as detailed above.
deciding on its price, the
areas it should be supplied It is well understood by consumers that
advertising and marketing is general in nature,
to, and how it should be
advertised does not take into account an individual’s
circumstance, is intended to sell a product,
and does not represent the consumer’s
interest.
For each of these Support - “non-personalised” however, this must
options an additional come with a clear explanation that it is general in
alternative is adding nature, that the consumer’s specific circumstances
either “non- have not been considered; that other options have
personalised” or not been considered as to whether they may better
“non- tailored” in front serve the consumer; as it is general in nature the
of them. For ‘product sales material’ or the ‘strategy information’
example, an may not be in their best interest or suit their specific
additional option for and broader needs; the consumer must consider
“choices” can be how and if the ‘product sales material’ or the
either “non- ‘strategy information’ may suit their needs; and a
personalised choices” suggestion to consider seeking personal financial
or “non-tailored advice to assist the consumer in making an
choices”. informed decision.
Oppose “non-tailored” - Consumers may not
have a clear understanding of the meaning of
“non-tailored”. “Tailored” may be industry
jargon rather than a commonly and
consistently understood term.