By: Jim Bulling and Laura McFadzean
On 14 November 2023, the Australian Government released what is described as the first of three tranches of proposed draft legislation implementing the QAR recommendations.
While the government is still saying it intends to address the remaining recommendations of the QAR, there were no commitments given at this stage.
Superannuation adviser fees
The draft bill clarifies that superannuation trustees are able to pay a member’s financial advice fees from their superannuation account. The draft bill includes the following changes to superannuation legislation:
- Repeals the requirement that advice be “in relation to a member of the fund” and clarifies that personal and financial product advice must be wholly or partly about the “member’s interest” specifically in the fund;
- Where advice is about multiple matters, the trustee can only pay the portion of the cost of the advice concerning the member’s interest; and
- Trustees are not obliged to agree with a member’s request that their advice fees be charged to their fund, which ensures trustees can comply with their duties under superannuation laws.
The draft bill also provides for superannuation trustees to be able to deduct payments of certain personal advice fees from a member’s interest in their fund from the fund’s assessable income.
The draft bill amends the “conflicted remuneration” definition in section 963A of the Corporations Act 2001 (Cth) by specifying that benefits given by a client to an AFS licensee or a representative of a licensee are not conflicted remuneration, in addition to removing some redundant provisions.
The proposed definition in other regards retains the legal substance of the current definition.
Conditions on insurance exemptions from conflicted remuneration
Under the draft bill, a person who provides and receives a commission for personal advice to retail clients in relation to the issue or sale of life insurance, general insurance and consumer credit insurance products, will need to disclose mandatory details about the relevant commissions and obtain the client’s informed consent to the payments.
Ongoing fee consent documents
The draft bill enables providers to obtain their client’s consent for ongoing fee arrangements and fee consents on an annual basis using a single (yet to be) prescribed consent form.
Financial Services Guides (FSG)
The draft bill permits financial service providers to give their clients a FSG via their website. Among other requirements, this can occur where the financial service is personal advice to the client, the client did not request a copy of the FSG and the webpages displaying the information are up-to-date and readily accessible.
The reforms contained within the package released last week should provide some modest relief from red tape on a couple of fronts, but the more significant reforms suggested by the QAR – fundamental changes to adviser obligations in relation to financial product advice – have not been included at this time.