19 March 2014

Future of Financial Advice Amendments – Details-stage Regulation Impact Statement – Department of the Treasury

Australia’s financial services industry is a significant part of the Australian economy.  It employs more than 400,000 people and is expected to continue growing, driven by Australia’s ageing population and increasing pool of superannuation funds.

As part of its commitment to reducing the regulatory burden on business, the Government has announced changes to the regulation of the financial products and services sector.

The key reforms include:

  • Removing ‘opt-in’ requirements, (under which advisers would otherwise need to obtain their client’s approval every two years for ongoing fee arrangements);
  • Limiting annual fee disclosures to prospective clients only;
  • Removing a ‘catch-all’ provision in the best interest duty, as well as providing a safe harbour for satisfying the best interest duty; and
  • Exempting general advice from the definition of ‘conflicted remuneration’, except where the general advice is provided together with personal advice.

These reforms are estimated to produce average ongoing compliance cost savings of around

$190 million per year, as well as once-off implementation cost savings of around $88 million.  Minor policy changes resulted in modest revisions to the compliance cost estimates contained in the options-stage RIS.  Overall, the measures were assessed as having a major impact on the broader economy and therefore given a B rating (on a scale of A to D) in relation to the level of analysis required.

An options-stage RIS was prepared by the Department of the Treasury to facilitate consultation. As the proposal relates to an election commitment, alternative policy options were not considered. The options-stage RIS was published on 13 January 2014.

A details stage RIS was subsequently prepared and certified by the Department of the Treasury, and has been assessed as adequate by the Office of Best Practice Regulation.  Due to the significance of the proposal, a Post-implementation Review of the proposal will be required within five years.

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