It is the most audacious example of self-interest where the needs and protection of Government are prioritised over those of Consumers on an industrial scale.

The past ASC/ASIC customary response to MIS product failures over 25 years has been to immediately blame the Adviser Profession regardless of the mitigating circumstances. This approach has allowed other stakeholders like trustees/auditors/custodians/regulators to continually avoid accountability and therefore not change their flawed conduct.

It is no mere coincidence that the reasons for the 2009 TRIO Superannuation fraud are mirrored by the Shield/First Guardian fraud some 15 years later.

The ‘low hanging fruit’ Financial Advisers [Advisers] have been too easy pickings for ASIC to divert blame away from themselves and all other stakeholders for MIS product failures.

Over this period we are not aware of one person from the Institutions who has been legally dealt with or banned by ASIC with their successful prosecutions – it is always against Advisers.

 A historical perspective – In January 1998 the Australian Securities Commission [ASC] reached a settlement with stockbroker JB WERE over a failed prospectus but during this process ASC realised they can be held legally responsible for inaccurate prospectus content. This realisation induced Government to introduce 2001 Corporations Law changes where MIS legislation removed ASC/ASIC’s liability for the content of the new Product Disclosure Statement [PDS] format.

This simplified PDS regime protected ASC/ASIC from legal recourse but literally threw Consumers under the ‘consumer protection bus’, the very stakeholder Government are meant to be protecting.

We estimate that around $50 billion of consumer savings have been either lost, frozen or impaired through the failure of over 200 PDS Financial Products since 2001. We strongly suggest the MIS regime is largely responsible for this ludicrous outcome.

See attached FAILED FROZEN & IMPAIRED funds.

PDS Disconcertion –  ASIC’s PDS duty is to ensure there is a custodian, trustee and other relatively minor requirements are in place but takes NO responsibility for the sustainability of the business model or background of Directors managing the product - the critical elements of any investment strategy. This tick the box exercise with a bizarre Caveat Emptor warning in place has proven to be manifestly inadequate to protect Consumers but it has been in place for over 25 years, continually failing but with no political will to change it. 

As many PDS’s fail over the years the typical response from Government is more compliance which has clearly not worked, the products have just kept on failing – a new approach is badly needed. 

Consumer confusion - The core problem with MIS is consumers think that any PDS registered [and therefore perceived to be released by ASIC onto the market] has been ‘approved’ by the Government. The grave danger of this in our online world are Consumers investing directly with the product managers thinking it is ‘backed by Government’.

One of the most high-profile failures in recent times has been the Stirling First retirement village project in Perth where consumers lost their life savings and accommodation to a flawed PDS which they assumed was government ‘approved/sanctioned’. 

Flawed PDS research ratings - a long term profoundly conflicted process in the financial services industry are Product managers ‘shopping around ‘ for a favourable research rating to attract investor interest and then corruptly paying the Research House directly for the favoured outcome. Investors/Advisers should be the only stakeholder funding research ratings, we suspect at least 95% of the 200 plus failed PDS’s had a positive research rating purchased under conflicted/corrupt circumstances.    

Rotten from the outset – the fundamental problem with the MIS process is the PDS products can have a flawed business model with less than reputable Directors producing fraudulent documents that can superficially satisfy RG 78/274 compliance checks in the short to medium term until it ultimately ‘blows up’. 

With ASIC avoiding the responsibility of analysing this critical content, these ‘accidents waiting to happen’ PDS’s find their way into the open market for Consumer consumption. Someone must take responsibility for this elementary duty to protect consumers.   

The 2009 TRIO Fraud was a classic example of incompetence where the Custodian was holding the ‘paper assets’ but failed to check whether the physical capital was actually in place. The auditors, trustees, research houses and ASIC/APRA were also heavily criticised in the Senate Trio Inquiry Report BUT the Financial Advisers [who were hardly mentioned] were the eventual scape goats. 

As already mentioned, it is no mere coincidence that stakeholders who escape accountability do not change their habits.         

Same old, same old…. – the typical Government response to product failure over the past 25 years has been to ‘increase compliance’ which has clearly not worked and probably never will. All it has done is increase the cost of Advice for Consumers and has NOT decreased the incidence of product failure, in fact it has got worse in recent times with Dixon, Shield and First Guardian. 

Next to useless compliance is the only approach the Governments knows, as already stated, we badly need a different approach to protect Consumers and Advisers. Clever criminal minds will always defeat paperwork.   

The current environment – ‘Dodgy Inc’ can easily get a flawed PDS ‘registered’ with ASIC, buy a positive research rating, then market the PDS online to Consumers who think it has been ‘approved’ by the Government. If it fails, ASIC/APRA are all care and no responsibility, auditors/research houses/auditors/trustees/Institutions all run for legal cover and point the finger at Financial Advisers who must deal with bereaved clients. 

Thankfully this sickening 25-year charade has been mitigated in recent times with ASIC attacking the other stakeholders for their inept conduct with the Shield/First Guardian failure and the Minister is now holding all stakeholders to account with CSLR. 

Finally, some fairness is entering the market where both the Minister and ASIC should be congratulated for their decisions and action.        

The quintessential problem – It is clear back in 2001 ASC/ASIC wants no responsibility for the key content of a prospectus/PDS and nothing has changed. Unfortunately for over 100,000 Consumers who have lost savings since 2001, the key content of a PDS is crucial to the performance of their invested capital.   

ASIC just wants the feeble ‘tick the box’ duty then run for cover and blame others if the PDS blows up. That is not consumer protection…. its bordering on incompetence and not being fit for purpose. Consumers and Financial Advisers need a professional, competent and conflict free third party to assess a PDS before investing. 

Research houses are the logical choice if their funding is derived from clients/Advisers NOT product manufacturers. Apart from Advice practices having inhouse experts to assess product [which will increase the cost of Advice for Consumers], there is currently no other choice in the market than the established research houses. 

Summary and a possible solution –  Recent history has demonstrated we do NOT need more compliance or new laws created to protect Consumers savings. The last 25 years has clearly shown that mountains of compliance paperwork do not work, Government must start thinking outside of the square. 

Government needs to also understand that Advisers want the best outcomes for their clients, or they don’t have a business. It is time for Government to seek the views of experienced Advisers and stop treating them from an initial perception of mistrust.   

What the Profession needs is a non – conflicted research capability for the market generally and at the point of ASIC registering a PDS for Consumer assistance with decision making. If a professional Research panel rates a new PDS on a 1 – 10 score basis, any PDS scoring under 5 will be more than likely ignored and eventually be starved out of the market. 

Surely it must be incumbent on ASIC to provide a third party independent assessment mechanism for Consumers considering they are ‘registering’ a PDS for essentially market release. 

It does not have to be as comprehensive as the ASX investment products monthly update; it can be totally outsourced to independent parties with ASIC indemnified against any liability. This has got to be better than a ‘caveat emptor’ warning.    

It is time to be proactive with preventing PDS failure from happening rather than being reactive to it with more next to useless compliance that clearly does not work and drives the cost of Advice up for Consumers.    

Considering ASIC are receiving over $340m annually from the Adviser Levy to prosecute those responsible for fraud and product failure, it is time to be more proactive with preventing PDS failure by ASIC funding an independent research panel to assess new PDS products before market release – this is not rocket science, it should be a fundamental duty of Government to protect consumers.   

ASIC using Adviser sourced capital to fund the panel will satisfy the conflict free funding test and eventually reduce the cost of advice for Consumers when Advisers no longer need other research sources. Leading Research House candidates for this role would be Mercer, Lonsec, Morningstar.  

We believe this approach is a win/win/win for Consumers, Advisers and common sense. 

Peter Johnston | Executive Director

The post MIS – THE ART OF THROWING CONSUMERS AND FINANCIAL ADVISERS UNDER THE BUS. appeared first on AIOFP.

Unfortunately however, the CSLR guidelines were professionally tampered with at the point of legislation in June 2023, an event that has greatly disadvantaged Consumers and the Advice Profession. Although we welcome former Minister Jones’s pre – retirement/election initiative of instructing Treasury to review certain aspects of CSLR,  it will only ever be a ‘band aid’ solution. CSLR Legislation is fundamentally and critically flawed, it has become potentially the Grim Reaper of the Advice Profession. 

This pause will hopefully give Minister Mulino time to reassess the circumstances/unintended consequences of this event and recommend structural legislative change. Unfortunately the previous Government wasted 3 years with severe vacillation that allowed this legislation pass through Parliament.     

THE PROBLEM – The crucial issue is the current CSLR legislation does not reflect the intent of the 2017 Ramsay Review and Commissioner Hayne’s RC 2019 intentions which had considerable market support.  We believe the CSLR outcome was heavily and successfully lobbied by the Financial Services Counsel [FSC] to favour of Institutions/Product Manufacturers [manufacturers] at the expense of others.  Taking advantage of technical ignorance with Politicians and Bureaucratic bias in Canberra at the time, Manufacturers were excluded from being held to account for the management/performance of their own Financial Products and this responsibility was inexplicably and unfathomably passed onto the Advice Profession and their Consumer clients.

It was truly an astonishing achievement by the FSC  for their institutional Members to negotiate this position but unfortunately a diabolical outcome for Consumers and the Advice Profession.

In recent times the AIOFP has written to RC Commissioner Kenneth Hayne, ASIC Commissioner Alan Kirkland, former Professor Ian Ramsay and current Productivity Commissioner Julie Abramson requesting their assistance with Consumers and the Advice Profession to avoid a catastrophic outcome. We are seeking their cooperation to publicly state that the CSLR structure they initially recommended is not reflected in the current CSLR Legislation. Please note that Kirkland/Ramsay/Abramson were the original and only Ramsay Review panelists. 

We have been disappointed with the response from three, whereas Mr Kirkland is the only one not to respond. The responses varied from ‘not wanting to be involved’, ‘no longer interested’ and too conflicted to comment’. Considering the many millions spent by Consumers/tax payers on these matters and the influence these individuals have wielded, they should be compelled to comment post release when its in the best interests of Consumers in our view. We contend that if any of these highly esteemed and respected individuals cooperated, it will shine a different light on the CSLR issue.  

We will now be writing to the Chair of the FSC seeking their cooperation with informing Minister Mulino that their lobbying success with the CSLR Legislation needs to be rescinded due to the seriousness of the unintended consequences. 

Considering CSLR and the Life Insurance Framework Legislation [LIF] are arguably the two most draconian legislative outcomes in Financial Services history, and the FSC successfully lobbied both outcomes, we will be requesting they also include the modification of  LIF in their report to the Minister.

REGULATION FAILURE – The truism ‘history always repeats itself’ applies to the latest SHIELD Superannuation failure. In 2009 the TRIO/ASTARRA circa $180 million Superannuation fraud exposed numerous massive flaws in the regulation of the funds management industry including the role of custodians, research houses, trustees, auditors and ASIC/APRA. The subsequent Senate Enquiry exposed the numerous blatant flaws with the conduct of these stakeholders but very little has been done about modifying their behaviour over the last 14 years by ASIC and APRA. Being a Superannuation fraud, APRA was held responsible and victims were compensated, ASIC were heavily criticized for their conduct.

It should be noted that the role of Financial Advisers in this Senate Report was negligible, it was clearly a regulatory failure by ASIC and APRA who at the time typically ‘spun’ the blame onto the hapless Financial Advisers. We are very pleased that market sentiment is now moving away from blaming Financial Advisers for product failure and focussing on the failure of Regulation, the incompetencies in the Funds Management sector and those who should be monitoring them. Furthermore, the ASIC press release on 2/6/25 detailing widespread compliance deficiencies in the Managed Funds Management industry comes as no surprise, this has been happening since the flawed MIS legislation was introduced over 33 years ago. 

It is time for Canberra Bureaucrats and senior Politicians to move away from blaming/bullying innocent parties, admit there is a major failure of Regulation with ASIC and finally do something about it. We would also like to point out that NOT having experienced Financial Advisers on any policy decision making  panel is a big mistake for very obvious reasons, Practitioner feedback on the relevance and practicality of policy content is essential to mitigating red tape and lowering the cost of advice for Consumers.

SUMMARY –  The manipulated CSLR legislation is an attempt to perpetuate the flawed and outdated narrative that Financial Advisers are responsible for the failure of financial products. This no doubt suits the agenda of ASIC and the other stakeholders, but it must end. 

ASIC have been avoiding responsibility for decades by ‘spinning’ the blame onto the Advice Profession to protect their own market image but in doing so they have allowed the other stakeholders to be less than efficient with their conduct, particularly the ‘big end of town’. The abovementioned ASIC press release on 2/6/25 says it all, it was a bold attempt to again deflect blame onto others but in the process highlighted their own ongoing deficiencies. 

ASIC takes no responsibility for allowing flawed products onto the market and no responsibility for the ongoing monitoring of these products, so what does ASIC actually do to protect Consumers from Products failing? Judging from its numerous press releases it spends the vast majority of its time being REACTIVE to relatively minor market offences by attacking low hanging ‘Adviser fruit’ and NOT being PROACTIVE by holding other stakeholders to account for their conduct including themselves.   

The CSLR manipulation has severely clouded the future viability of the Advice Profession, Financial Advisers have no choice but to pass the ASIC and CSLR levies back to clients which is clearly not sustainable. Furthermore, it is extremely difficult to attract new entrants into the Advice Profession with the grossly unfair CSLR liabilities casting a massive black cloud over the industry.

The CSLR solution is quite straight forward, Manufacturers pay for product failure, Financial Advisers for poor advice outcomes and Risk Advisers for poor risk advice failure. Banning Financial Advisers from creating a vertically integrated business model will eliminate future ambiguity around the responsibility if a product fails.   

Peter Johnson | Executive Director

The post CSLR – THE MODERN DAY GRIM REAPER appeared first on AIOFP.

It is that time of the year when the Advice Profession participants must make a decision on which Association they will support. The Profession is currently at a pivotal point of its development and needs a strong experienced voice in Canberra to consolidate its position. The key to selecting the best Association option is to match your objectives with the Charter and conduct of the organisation.

AIOFP SUCCESS – why be a member. 

The key to successful Association membership is joining an organisation that acts in their Members best interests and delivers what Members need to be successful in their practice, their Profession and their life. The crucial detail of an Association’s conduct and performance is in the ‘small print’ of the Charter and Mission statement, we strongly suggest understanding these objectives before making a decision to join any Association.   

The AIOFP Board believes we have delivered better value to Members and the Profession over the past 27 years than any of our competitors.

The key to AIOFP’s success is only having one category of independent Adviser membership complemented by a Board/Management of either past or current independent Advisers, an independent Economics Professor Chair and a Charter to only act in the best interests of our members and no one else. Considering Advisers must act in the best interests of their clients; Consumers directly benefit from this thematic approach and Advisers have security the organisation will protect your position. 

In addition, the AIOFP will not sit on the fence politically and its political support cannot be bought, only leased if Member favourable conditions are maintained. More importantly, we will always take a position on an issue and stand for something if it is in the best interests of members. We believe Canberra respects and is wary of our approach, a favourable strategic position to have in the nation’s capital. 

The AIOFP has the most successful track record of Legislative, lobbying and educational outcomes for the Advice Profession, they are – 

• We developed and successfully lobbied for the Education Pathways Legislation in late 2021.  
• We lobbied the Senate cross bench in 2021 to block the CSLR legislation attempt by Minister Hume.
• We assisted with the removal of the Seat of Kooyong incumbent Josh Frydenberg in 2022.
• We recently supported now Small Business Shadow Tim Wilson to defeat the TEALS in the seat of Goldstien.
• We commenced the ongoing education of all Politicians about our Profession from 2015 by regular emails, Conferences in Canberra and meetings.

The AIOFP short, medium and long term objectives are  important to understand, they are –

1. Short term is to lobby for amendments to LIF, CSLR and the compliance issues, this process commenced 3 years ago and is ongoing.
2. Facilitate the highest professional standards that are practical and relevant to Consumers and Advisers.
3. Provide new client opportunities for Members, this has commenced with other new projects to be announced at the Gold Coast conference.  
4. Over the long term, position Advisers and their clients as a powerful political faction that all Politicians are wary of, this will address the political overreach into our Profession. 

Over the past 27 years the AIOFP has ‘ruffled plenty of feathers’ whilst endeavoring to act in the best interests of its members, we do not make any apologies for that. Politics ultimately is all about numbers, the larger the Association the more influence it will have BUT only if this Association is acting in your best interests.

The AIOFP is the most successful Advice focussed Association in the Profession by some distance. This document is all about building a compelling case to encourage new members to join and current members to stay.      

DECISIONS – WHAT TO LOOK FOR.  

When deciding on which Association to support we suggest you consider the following analytical process –  

• What is the organisation’s charter, specifically who are they acting in the best interests of…..Consumers, Institutions or Adviser members?
• Ensure you are in the dominant member faction if more than one exists – minority factions have little power.   
• What is the principal funding source of the organisation?
• What are the origins and background of the Management and Board? 
• What is the track record of achievements?        

It is quite obvious the competitive dynamics of the Advice Profession landscape involves three major players – the AIOFP, FSC and the FAAA. Below are the Charter details from the FAAA and FSC websites that should be understood before making a decision to join.

The FAAA specifies acting in the best interests of Consumers and Advisers, recent history demonstrates the FPA’s Charter was similar but unfortunately, they cooperated with the FSC/AFA/Minister O’Dwyer in 2015 to produce LIF/FASEA etc justifying the controversial decision on acting in the best interests of Consumers…..a diabolically poor decision for both Advisers and Consumers.

The FSC nominates ‘financial advice licensees’ in with retail/wholesale funds management, superannuation funds and institutions they represent….. considering they are funded by the Institutions and the board/management are from Institutional backgrounds, why would an Adviser give the FSC their political capital to ultimately use against themselves in Canberra? Their very impressive track record of delivering LIF/FASEA/Grandfathered ban and CSLR are not great outcomes for the Advice Profession, it seems they want to leverage off having Advisers in their membership to engage in Canberra. That is a dangerous outcome for the Advice Profession, we cannot understand why Advice groups want to be their members….. 

OTHER CONSIDERATIONS 

Canberra has long complained that our Profession has too many Associations with diverging views and they are correct. Since 2015 the Adviser numbers have at least halved due to the ‘culling’ objective of the last Government but we now have 12 Associations trying to represent 50% less Financial Advisers in Canberra. The original JAWG group of FPA, AFA, BFP, CPA, FSC, FINSIA, IPA, Licensee Leadership Forum, SMSF, Stock Brokers, Adviser Association [AMP] has clearly not worked. How can you have Institutions, Product Manufacturers, Accountants, Stock Brokers and Financial Advisers reaching a consensus? It has never happened before and is never likely to. 

The JAWG track record of achievement is poor, all it has done is confuse Canberra and allowed the FSC to break from the JAWG pack to adjust CSLR to suit the Institutions and smash the Advice Profession.   

The spectacular success of the Mortgage Brokers in 2019 was due to only having 2 collaborating Associations involved and political timing, the AIOFP Board rejected joining the JAWG consortium business model in favour of our above focussed business model approach which has clearly worked.

The Board welcomes all independently owned Advisers to join the AIOFP to amplify and participate in our success.

Peter Johnston | Executive Director

The post THE VALUE OF AN ASSOCIATION – but only if it is acting in your best interest appeared first on AIOFP.

Life insurance commission reductions to benefit consumers

High upfront life insurance commissions will be reduced with the passage of the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 in the House of Representatives, the Minister for Revenue and Financial Services, the Hon. Kelly O’Dwyer MP, said today.

The Government thanks the Association of Financial Advisers, the Financial Planning Association of Australia and the Financial Services Council for their agreement in developing this important package of reforms.

Read the complete statement here.

The Hon Kelly O’Dwyer, Minister for Revenue & Financial Services

—————————————————————————————————————————————————————————–

EXECUTIVE SUMMARY 

The Advice Profession has endured a ponderous 18 year political and bureaucratic overreach by all sides of politics that badly needs to be resolved in the near future for the benefit of Consumers, the sustainability of the Profession and the nations parlous underinsurance position.   

This 18 year saga commenced in 2007 when the Ripoll Enquiry later evolved into the 2013 FOFA reforms which was then perpetuated by the 10 – year Frydenberg/O’Dwyer  influenced Coalition Government reign. Unfortunately for the future financial health of the nation and Consumers, the out going Minister failed to address the ramifications over the past 3 years.

With a new incoming Financial Services Minister probably wondering whether they have been given a poisoned chalice or not, it is time to comprehensively address the core issues with one of the most critical legislative failures in modern times – the LIFE INSURANCE FRAMEWORK [LIF] Legislation.       

LIF must be the most vicious and industry targeted destructive legislative event in living memory. Ironically and sadly however, it is also one of the most effective and successful pieces of legislation once its backer’s objectives are analysed and assessed. The greatest LIF losers are Consumers/tax payers, the very group all stakeholders should be protecting.

We believe LIF was not an ill conceived concept with unfortunate unintended consequences, it was specifically designed and engineered to decimate the Financial Advice Profession and in particular the Risk Adviser fraternity.

As with all financial services legislation over the past two decades, the Financial Services Council [FSC] is in there protecting and promoting the best interests of their Financial Institutional members [which they should be doing]  but as always, the Advice Profession is led to the proverbial slaughter house.

If you need reminding of the past events please go to the FSC website where the REVIEW OF RETAIL LIFE INSURANCE ADVICE report by John Trowbridge as Chair of the LIFE INSURANCE ADVICE WORKING GROUP [LIAWG] is displayed on a ‘Trophy Wall’ of past FSC achievements. This paper was funded by the FSC and AFA, later backed by the FPA and morphed into the LIF legislative catastrophe via Minister O’Dywer with the assistance of 5 major Life Insurance Companies.

It has been and still is a disastrous outcome for all stakeholders which needs immediate attention from the new Minister.

THE DUPLICITOUS and other PLAYERS

During 2013, the emergence of Robo Advice, Artificial Intelligence, direct online marketing and telemarketing were looming large over the future direction of financial advice. Many Financial Institutions were convinced the future of human delivered advice to consumers was clouded at best and subsequently put in place strategies to remove Financial Advisers from the consumer relationship. This deliberate culling procedure was so ruthless and heartless that 30 suicides were reported.

Coincidentally [maybe], the emergence of a senior Liberal Party politician’s ambitions to be one day Prime Minister was a major factor in the development of not only LIF but FASEA, unnecessary compliance and the ban on Grandfathered Revenue.  This person needed Financial Institutional backing to achieve the political objective, therefore pleasing the Financial Institutions via the FSC was paramount.

It should be noted that the Liberal Party has acknowledged they got it wrong with our Profession in the past and are prepared to support appropriate amendments.   

We cannot say whether the Institutional strategy was directly linked to the Politician’s agenda but the overall objective to frustrate, intimidate and starve Advisers out of the Advice profession was comprehensively achieved. With over 30,000 Advisers pre 2015, the real Adviser number is around 11,200 with 500 Risk only Advisers still operating. With millions of baby boomers retiring over the next 5 years and the nations underinsurance liability over $2.5 trillion, something urgently needs to be done.

Like any festering sore, LIF needs to be lanced to remove the poison and be allowed to heel. We will not be pulling any punches with who are the architects and what their objectives were and are. It is time for the new MINISTER to be informed of who and why this legislation was created, the dramatic negative affects it has had on all stakeholders and what needs to be done to revive the Life Insurance industry to reduce the nations dangerously over bloated underinsurance position and most important of all, lower premium costs for Consumers.

Furthermore, it did not matter at the time that both the UK and New Zealand industries tried similar commission elimination experiments 10 years earlier but failed dismally or that Consumers prefer to pay for risk advice via commission – it was all about the FSC end game of culling  Advisers. Commission levels are now back to 240% and 180% respectively in UK/NZ in a thriving environment. In Australia the level is 60% and prohibitive compliance costs make it difficult for Consumers to accept the terms, this also makes it uneconomic for Advisers to offer risk solutions to clients – hence the 50% reduction in new policy capital inflows and the corresponding 50% increase in premiums for existing and new policy holders.

The left wing consumer groups and their supporters must understand that Consumers need to be coerced into buying risk products and most consumers prefer to pay by commission anyway. As long as the commission cap stays in place, the elimination of conflicts is preserved. Ironically it was Minister Shorten in 2012 who recognised the difference between Risk Advice and Financial Advice by carving out Risk products from the FOFA ban on commission payments.

Obviously this carve out did not suit the political agenda of the FSC and their co – conspirator’s….the outcome is now part of an unfortunate history.

For the record, the AIOFP was approached in 2014 to join the FPA/AFA/FSC Association triage to support then Minister O’Dwyer’s objective of having no industry opposition to LIF’s passage through both Houses of Parliament. We immediately rejected the offer after an earlier consultation process with our members and the broad experience of our Adviser background Directors, the wise heads in the industry warned and predicted exactly what would and did happen.

We were also assured the Life Offices of Suncorp [now Resolution Life], TAL, MLC, AIA and Zurich formed a consortium [the Consortium] who were backing LIF  and the Ministers wishes. This strategy was also supported by the FSC, FPA and AFA, see attached press release from the Minister, most of these players are involved in the abovementioned Trowbridge Report.

RAMIFICATIONS TODAY.  

The ongoing deterioration of the Nations underinsurance position will continue unless Government intervenes and a bipartisan position is found to counteract the influence of the left wing consumer groups. We also need a commercially pragmatic approach from ASIC, it is very clear from the last decade of LIF influence that the ‘experiment’ has comprehensively failed.

The Consortium agenda may just explain why CALI has been ineffectual in Canberra over the past 3 years, the 7 person CALI Board is dominated by 5 Consortium member Directors who all have large back books of policies to sustain their business model funding requirements going forward. It seems they are quite content with the current dire circumstances to eliminate competition with Integrity Life the latest victim.  The Life Offices with small back books need new retail policy’s to fund their operations and the general health of the entire industry.

The selfish and uncaring attitude of this Consortium towards the Risk Advisers, Consumers and the industry in general is utterly reprehensible, they do not deserve Adviser loyalty and should be sanctioned by Government.

Considering the CSLR and ASIC imposed levies are being used to pay for industry damage caused by related parties, these Consortium players should be paying compensation for the industry and consumer calamities they have directly caused with their anti – competitive behaviour and influence.

The cutting of commission by 50% and imposing unnecessary compliance demands on Risk Advisers has led to Consumer premiums rising by ironically 50% and the subsequent widespread cancellation of existing policies. Consumers are the greatest losers in this unprecedented disaster, closely followed by diminished Government stamp duty revenue, Life Office job losses and the cost of welfare payments to uninsured consumers is escalating.

QAR self described ‘lefty’ author Michelle Levy supports the existence of a commission model in her QAR recommendations but the industry has struggled under the current 60% upfront level. This needs to be moved up to at least 80% capped and with the expected current SOA content requirement moving in favour of Advisers using professional judgment,  these amendments will immediately transform the market for all stakeholders.

We support Consumers receiving a commission AND a fee for service based option proposal to select from when assessing an offer from an Adviser, let Consumers make the decision on what suits them, not Canberra Bureaucrats.   

Like the CSLR Legislation where the Advice Profession agreed with the Hayne and Ramsay recommendations, the final legislation content is negotiated behind closed doors in Canberra on the eve of the Chamber vote which is where the FSC excels in achieving outcomes for their Institutional members – unfortunately the Advice Profession needs will always be secondary to those major Institutional funders of the FSC.

This is not rocket science, Advisers should not be giving the FSC their political and monetary capital to use against them in Canberra. CSLR is a classic example, history has clearly demonstrated that the Advice Profession cannot afford to have the FSC representing their interests in Canberra, it is time for greater collaboration by the genuine Advice Association players to represent the Profession in Canberra.

Our final request to the new Minister is please realise that Financial Advisers want the best outcome for their clients in all respects or they will lose them and not have a business. Experienced Advisers from the coal face of Advice need to be seriously consulted by Government on what is best outcome for consumers and the Profession – the old way of Canberra’s starting position of negativity towards our Profession is no longer appropriate.

This paper has been sent to industry stakeholders including all Politicians for consideration.

The post LIF – THE INCONVIENIENT FACTS. appeared first on AIOFP.

EXECUTIVE SUMMARY
Consumers and the Advice Profession badly need the exquisite skills and experience of the former CHOICE CEO, panel member of the RAMSAY REVIEW that led directly to the establishment of the Australian Financial Complaints Authority [AFCA] and the Compensation Scheme of Last Resort [CSLR] and now ASIC Commissioner, Mr Alan Kirkland.

No one has better credentials to rescue Consumers and the Advice Profession from the scourge of the Institutional lobbying power to avoid accountability and deflect their management incompetency blame onto other stakeholders.

The current lethal legislative capacity of CSLR will wipe out the Advice profession in the short to medium term unless all sides of Politics understand the threat and are prepared to act.

The ramifications for Consumers will be severe with the millions of baby boomers approaching retirement wanting and needing independent financial advice. With barely 11,000 practicing Advisers left assisting around 2 million clients any further loss of Advisers will be catastrophic for the millions of consumers needing assistance going forward.

The CSLR levy cost to Advisers will ultimately be passed back to Consumers through higher advice costs in the short term but this additional impost is driving Advisers out of the industry and is a major disincentive for the new Adviser to enter the Profession.

Simply put, the ASIC levy, CSLR Levy and the cost of PI Insurance upfront costs are literally strangling the Advice Profession, unless ASIC acts and assists the cause, there will be very little left to regulate in the Advice space.

It should be pointed out that ALL Advisers are subject to the CSLR Levy, including those working for Superannuation Funds where the Levy will be passed onto fund members.

In my 46 years in the Profession, the only comparable time for a morale this low was during the ‘suicide period’ of LIF/FASEA and the ban on Grandfathered Revenue, we cannot let that happen again. It is time for the thinly veiled ‘them and us’ negative attitude between and ASIC and the Advice Profession is put aside for positive humanitarian outcomes, it is that serious.

HAYNE AND RAMSAY

What Commissioner Hayne recommended in the Royal Commission with CSLR and what emerged with the final legislative structure is massively contradictory to say the least.

We contend that the Financial Services Council [FSC] and Australian Banking Association [ABA] actions to please their Institutional backers is not in the best interests of Consumers and a lethal threat to the Advice Profession’s survival.

Former Minister Jones recognised the dishonourable aspects of CSLR by referring the legislation to Treasury for assessment, an outlandish manoeuvre considering Treasury are the original architects of the Legislation and profoundly conflicted with the Dixon Treasury Bureaucrat victims involved.

If the Minister was serious, he would have suspended any further levies inflicted onto the Profession until the assessment was completed. Failing to do this suggests ‘kicking the can down the road’ to post election territory was front of mind. In addition, this review should be conducted by an external professional party not a conflicted Canberra based Bureaucracy with the ‘wrong skin in the game’.

Comm Hayne and Professor Ian Ramsay in his 2016/17 ‘Review of the Financial System External Dispute Resolution and Complaints Framework’ paper recommended both Financial Institutions and Financial Advisers should be separately held to account for failures in their respective disciplines – Institutions for their products failing and Advisers for poor/flawed strategic advice strategies.

Comm Kirkland was on the 3-person panel with Professor Ramsay that signed off on the abovementioned paper that went to then Minister Kelly O’ Dwyer in 2017. It should also be noted that AFCA is regulated by and answerable to ASIC, being an independent Authority some think AFCA are only answerable to their Board. This gives ASIC and Comm Kirkland unfettered power to influence the CSLR outcome once the Politicians adjust the legislation.

Comm Hayne also recommended CSLR should commence on 1/1/2008 allowing a retrospective opportunity for Consumers to recoup losses from past failed products where Institutions had avoided accountability [see page 36/37 of the attached document released by Treasurer Frydenberg in 2019].

This was of course never going to happen, there is no way the power of the Institutions via the ABA and FSC would permit such gumption. The grossly inexplicable final legislative CSLR outcomes influenced by the FSC/ABA contain the following unfortunate conditions –

• all MIS products and their Institutional owners are excluded from CSLR jurisdiction therefore zero accountability for their own products failing.

• Advisers are held accountable for the failure of Institutionally own products and currently been forced to pay a levy to fund their mistakes.

• the notion of retrospectivity was denied to circa 190 failed funds [see attached] but granted to the DIXON failure that suspiciously happens to have numerous Canberra Treasury Bureaucrats as personal investor victims.

We are disappointed that ASIC has not publicly opposed the CSLR legislative outcome at any point. Considering ASIC are the gate keeper of all Financial Products entering the market through their MIS registration process, an interpretation could be that they are in favour of Advisers being held responsible for the failure of Products they allowed onto the market.

ASIC is the regulator of the financial services landscape and for ASIC management to remain silent over a critical piece of legislation that heavily impacts Consumers must be viewed with skepticism. This is where we need Comm Kirkland to act. As one of 3 foundation panel members of the Ramsay Review, Comm Kirkland could not be happy with where the CSLR Legislation has landed, Consumers need him to educate all sides of politics on the foundation tenets of the Ramsay Review and what Comm Hayne recommended.

How can Financial Institutions who poorly manage their own products be permitted to discharge themselves from responsibility and then pass this cost ultimately and indirectly back to Consumers?

Our legal advice clearly suggests that the only way to inject some fairness and accountability into the operation of CSLR is to amend the legislation to force Product Manufacturers into the ‘tent’ where AFCA can hold them to account over the performance of their own products. This will provide greater protection and security for Consumers and save the Advice Profession from eventual extinction.

SUMMARY

The Advice Profession has always been in favour of a CSLR structure to protect Consumers from poor financial outcomes recommended by both Comm Hayne and Professor Ramsey during the 2016 – 19 period, it was then fair and equitable for all stakeholders. We also support the existence of AFCA.

The current FSC influenced CSLR Legislative arrangements allowing Financial Institutions to avoid accountability with the poor performance of their products and then diverting that cost onto the Advice profession is infuriating to say the least and a death sentence for the Profession.

This appears to be the finishing touches to the FSC’s objective over the past 11 years of removing independent advisers from the landscape. Who can forget their alliance with the FPA/AFA to introduce LIF, FASEA, Grandfathered revenue ban and heavy handed compliance measures?

The sad irony for Consumers is this CSLR levy imposed onto Advisers will be passed back to them anyway by Advisers who have been poorly treated by Canberra over the past 15 years and can no longer financially afford to absorb the cost.

We are hoping that Comm Kirkland’s background in Consumer protection and ASIC Chair Joe Longo’s leadership will now come to the fore for Consumers.

In Chapter 1.1 of the Ramsay Report titled ‘Context for the Review and Review Principles’, it clearly states who the Financial Services providers involved in the process should be – ‘Superannuation fund trustees [other than SMSF], approved deposit funds, retirement savings account providers, annuity providers, life policy funds and insurers who respond to complaints – collectively referred to as ‘financial firms’……. see attached photo.

There is absolutely no ambiguity over who should be held to account.

We will be writing to both Comm Kirkland and ASIC Chair Joe Longo requesting their assistance and forwarding this email to all members of Parliament.

The ongoing product failure events producing these CSLR liabilities strongly suggests the MIS product registration process is fundamentally flawed, perhaps this should be also an issue to be discussed and rectified going forward.

The future of the Advice Profession and the protection of Consumer savings are now more firmly and directly in the hands of Politicians and the ASIC Hierarchy like never before.

Peter Johnston | Executive Director

The post CSLR – WHY WE NEED ASIC. appeared first on AIOFP.

The term HORNSWOGGLE and this character was used in the 1980’s Gary Coleman Show to describe a person or organisation that deceives, cheats, swindles, hoaxes or scams another person. We think this best defines what has happened to the CSLR.

The post THE CSLR HORNSWOGGLE appeared first on AIOFP.

AN OVERVIEW.

The ITS TIME theme of our recent Canberra Conference for the Advice community to make an aggressive stand has arrived, the CSLR abomination is the catalyst to finally galvanise the Advice Profession.

The current acrimonious mood within the Advice Community over the CSLR is like no other issue in living memory. The anger is palpable, but we must however funnel this outrage into specific strategies that will make a meaningful difference to the plight of our Profession, our businesses and consumers. The timing could not be more perfect with the positioning of the political cycle and proximity to the Election.

It is also time we identified the real antagonists of our Profession over the decades to understand who has been working behind the scenes in Canberra to convince Politicians and Bureaucrats to put in place such malignant Legislation that is slowly destroying our Profession. It is critical to understand who are our friends and arguably more important who are our enemies in Canberra.

Perversely, the Advice community should [but we won’t] congratulate the Financial Services Council [FSC] for their success over the past 11 years with lobbying Canberra to legislate LIF, FASEA, Grandfathered Revenue ban, unnecessary compliance and now the CSLR successful manipulation.

FSC are by far the most successful Association lobbyist in financial services history originally operating under the Investment and Financial Services Association [IFSA] brand until 2010 and funded by the Financial Institutions. They are highly successful but unfortunately, a formidable enemy of consumers and the Advice community. The Advice community must be continually vigilant of any involvement the FSC has with Advice issues.

The FSC’s latest and greatest success for their Financial Institutional members has been moving the focus of CSLR away from Comm Hayne’s recommended structure to what we have today – legislation that is totally focussed on penalising the Advice community for other stakeholder’s incompetence. It exonerates Institutional poor product management and ASIC for allowing flawed PDS’s onto the market. Considering there has been around $40 billion of failed or impaired MIS’s since 2008, the FSC have done a magnificent job for the Financial Institutions to avoid accountability. Equally, they have unfortunately done a great job of shifting the cost onto the Advice community and ultimately consumers.

We suspect the only AFCA unpaid customers are from those failed Financial Advisers who are caught with product failure. Financial Advisers are yet again the political scapegoat whilst the perpetrators escape accountability.

How can Politicians and Canberra Bureaucrats accept that Financial Institutions cannot be held responsible for the performance of their own products? Is it stupidity, naivety or corruption? 

Paul Keating famously once said ‘just follow the money trail’ when trying to analyse human motivations. It should come as no surprise that the Financial Institutions were funding the FPA/AFA/FSC during their cooperation with then Minister Kelly O’Dywer in 2015 to give us LIF/FASEA etc. Why are we raising these historical factual events? If the Advice community does not understand what has happened in the past, we will continue to make the same mistakes going forward.

It should be noted that the Liberals have acknowledged that they did not get it right with the Advice Profession during 2014 – 22 period but are determined to correct it, we welcome this admission.

THE WINDOW OF OPPORTUNITY

We have a 2 – month window of opportunity to address CSLR’s outrageous ramifications if we are prepared to act with belligerence, combativeness and at times militancy to protect consumers, our businesses and our livelihoods.

Ambivalently sitting back and doing nothing about this issue is not an option, it has the potential to widely destroy businesses and adversely affect consumers. Although we do not have the political and monetary capital of the FSC, what we do have is over 2 million clients who vote in federal elections, there is nothing more powerful with the political parties at this stage of the political cycle. It is time to use our collective political might to threaten the Canberra bubble and its inhabitants.

THE CURRENT POLITICAL PLAY – CONFLICTS AND DISREPECT

You may recall the Morrison Government tried to deflect their accountability over the LIF/FASEA/Grandfathered Revenue leading into the 2022 Election by announcing the QAR Review in an attempt to ‘kick the can down the road’. The Albanese Government are trying to pull off the same stunt to limit political damage leading into the 2025 election by initially shocking us with the next CSLR Levy quantum and then announcing a ‘review’ that will take at least 6 months to also ‘kick the can down the road’ post – election to avoid accountability.

It is imperative to keep the CSLR issue live leading into the election to have any hope of amending the Legislation, we cannot allow the FSC to represent Adviser issues at any point considering they are the architects of the CSLR Legislative changes. It is almost comical that the FSC recently supported the notion that CSLR was unfair and agreed with Treasury reviewing the legislation….such sanctimonious behaviour.

The Minister suggesting Treasury Bureaucrats will review CSLR is incongruent nonsense. Considering Minister Jones’ office is full of Treasury bureaucrats who originally structured and approved the CSLR/Dixon outcome and Treasury/ASIC Bureaucrats are the victims of the Dixon losses, it is profoundly conflicted and an insult to our intelligence having Treasury review CSLR, it’s akin to appointing Dracula to assess the blood bank.

Now is the time to use an independent third party to conduct the review if one is needed, which we believe is unnecessary. The legislation should reflect exactly what the Ramsay Report and Comm Hayne wanted from the outset, Product manufacturers are held accountable for failed products and Advisers for poor advice outcomes, it is that simple.

Attached is a document Frydenberg released leading into the 2019 election where he pledged the Morrison Government would implement all Commissioner Hayne’s Royal Commission recommendations where CSLR was meant to commence on 1/1/2008 and cover all Managed Investment Schemes [see page 36]. Both sides of Politics agreed to implement CSLR in its recommended form which was of course not achieved, the Institutions were never going to let that happen.  Read more …. 

Enter the FSC representing the Financial Institutions who restructured the legislation away from Financial Institutions becoming accountable for poor management of their own failed products and ASIC for ‘registering’ them, essentially shifting the blame and accountability onto the Advice community and their consumer clients. It was a master stroke of evil political and legislative manipulation BUT it can be countered with desperate Political parties wanting votes and a very close Election outcome expected by May.

WHAT FINANCIAL ADVISERS NEED TO DO.

We see a 3 – step process commencing immediately. The Advice community’s powerful competitive advantage is its 2 million clients who will ultimately pay for this outrage via higher advice costs, a powerful political motivator to act in their own self – interest.

1. AIOFP action – We have been in constant contact with both the Ministers and Shadows Advisers over this issue since our November Canberra conference. We specifically want the legislation changed to keep the product manufacturer community accountable for the failure of their own products and losses for consumers. As Hayne intended, Financial Advisers are only responsible for poor Advice outcomes for consumers. We also want the Dixon liability removed. It defies the non – retrospective intention of the legislation and it’s a financial product issue, not advice. The first party to agree with our demands will get preferential treatment and consideration from the Advice community and their clients at the upcoming election.
2. Adviser Action – Every Financial Adviser should be immediately communicating with their clients about the unfairness of the CSLR and what it is going to cost them to remain a client. We need to engage and enrage consumers with the unfairness of this legislation.
3. Consumer action – once a decision is made on which political party will cooperate, consumers will be asked to email their local sitting member about their decision to either support or oppose them. Suggesting the client to put the least preferred party last on the ballot is a politically effective strategy to intimidate. This action will be exceptionally powerful going forward, future Politicians will be wary to infuriate our Profession.

SUMMARY

The Advice community is requesting that both sides of politics honour their bipartisan pledge in 2019 to implement the CSLR in its Commissioner Hayne recommended form. Is that too much to ask? Instead of a fair outcome of Advisers paying for deficient Advice outcomes and Institutions paying for their poor management of products, the FSC manipulated the Legislation to dump all liabilities onto Financial Advisers and consumers.

The Advice community must act with haste, the election is up to 3 months away and we must use our considerable political muscle as a collective to achieve our objective. For many practices, waiting another 3 years for the ideal phase of the political cycle again may be terminal for their business.

We have recently requested an update from the National Anti – Corruption Commission [NACC] with our CSLR/DIXON complaint made 7 months ago to assess whether this has contributed to the Minister’s sudden retirement.

The AIOFP has been active over the past 12 months with its lobbying objectives and will continue until Election Day, we will be shortly requesting financial assistance from our members to assist our activities.

Peter Johnston | Executive Director

The post CSLR OUTRAGE – TIMING PERFECTION appeared first on AIOFP.

• Returning Risk Advice back to pre LIF conditions.
• Eliminate DIXON out of CSLR Compensation.
• Elimination of Consent and Opt – in Forms.
• Allow Adviser professional judgement when constructing a Financial Plan/Statement.

These 4 ‘holy grail’ outcomes are in the best interests of all stakeholders, the Shadow Minister and his team should be congratulated. This action will significantly reduce the cost of advice for consumers going forward.

The commitments were announced at the AIOFP Conference in Canberra last Tuesday evening November 26th where the ‘Jones vs Howarth debate’ had a clear winner with 100% of members voting unanimously in favour of Shadow Luke Howarth’s presentation.

Minister Jones’ speech.

In contrast, Minister Jones’ presentation was somewhat disappointing. The Minister chose not to directly address any of the 10 Commandments preferring to regurgitate details of the Tranche 2 which will be positioned as an ‘electoral carrot’.

Like most others in the Advice profession, the AIOFP does not agree with certain aspects of Tranche 2 and it will not be good enough to take into the election and expect support from the Advice profession. In fact, we believe Tranche 2 is not in the best interests of consumers, the very stakeholder Canberra should be protecting.

This current stage of the political cycle is the only time the generally obnoxious and overbearing influence of the Canberra Bureaucracy can be neutralised. Also, during this period Politicians will at least listen to our concerns and more importantly act if sufficient pressure is applied. Nothing like the notion of losing their seat to get Politician’s motivated to ignore bureaucratic interference.

This window of opportunity only comes around once every 3 years, we must as a profession take full advantage of the circumstances, otherwise another 3 years of a flawed, expensive and defective operating environment is beckoning.

Marginal Seats.

Like all elections, the marginal seats will be where the contest will be won or lost. The realisation by all sides of politics that Financial Advisers have a strong financial/political relationship with their clients is our key competitive advantage over all other cohorts. Like the 2022 election the AIOFP will be participating in marginal seat activities, the only decision to be made is which side do we support.

It should be acknowledged that sitting Ministers do need to consult with their Caucus before making policy decisions, we will give Minister Jones until Friday 24th January to respond to the 10 Commandments before making our final decision on who the AIOFP will be supporting.

Member support.

The AIOFP is seeking member assistance to provide additional working capital during this period to maximise market opportunities for themselves, consumers and the profession in general.

Shortly you will receive an email requesting members to consider increasing their membership fees in a once off fashion where the contribution will be tax deductible. For non – members wanting to assist our efforts, a $275 contribution will qualify them as an Affiliate member for 12 months, again a tax deduction applies.

The dynamics of this election are delectable for the Advice Profession to make a big positive difference for Consumers and our Profession, but we need Member support to maximise our opportunities.

Peter Johnston | Executive Director

The post HOWARTH DELIVERS THE HOLY GRAIL OF THE AIOFP TEN COMMANDMENTS. appeared first on AIOFP.

The time has now come for minimum educational and ethical standards to be imposed on all Politicians entering all levels of Government.  

May 13^th 2004 will go down in political history as a dark day for Australia’s democratic health and culture. This was the day the 1948 Parliamentary Contributory Superannuation Act was read in the Senate for the first time to abolish the overly generous Superannuation pension scheme for Politicians.

Opposition Leader Mark Latham was successfully challenging Prime Minister John Howard leading into the OCTOBER 9^TH 2004 Election, Latham intimated he would cancel the highly unpopular scheme with taxpayers.  Howard immediately reacted and cancelled the entitlement which was quickly followed by the State Governments who all abolished their similarly generous arrangements.

This action was of course grandfathered for existing Politicians, a classic display of self-interest and a great victory for taxpayers but it can be argued a poor outcome over the long term for consumers and the Nation.  

This cancellation means all Politicians entering Parliament post the 2004 Election are excluded from the pension scheme and subject to conditions closer to current  taxpayer superannuation arrangements. What this has done is remove the incentive for the best potential candidates to enter Canberra making it very difficult for all sides of Politics to recruit the best brains [and ethics] into the political fray. This degradation of quality over the past 20 years is quite evident with the poor behaviour, ethics and intellect on display by some Politicians for all to see.

It is not a good look for Australian democracy when a former post 2004 elected Prime Minister cannot afford to leave Parliament because he had damaged his image, therefore could not get a job and does not get a pension to support his family.

With this deterioration of talent entering Politics surely it is time to now impose the already mentioned educational and ethical standards? A Political degree or similar and passing an ethics exam should be a minimum criterion. Without appropriate standards it has become quite apparent over the past 20 years that some Politicians are just not across their portfolios or do not generally understand basic issues.   

The current dynamics around both Anthony Albanese and Peter Dutton is fascinating. Unlike the last Prime Minister, they are two of the last ‘Mohicans’ left in the old Pension scheme with entering politics in 1996 and 2001 respectively. In this old scheme once the Politician achieves 20years service the retirement benefit is 75% of their best salary position with 5/6^th of this going to their spouse upon their death. No wonder political spouses are always smiling! 

The PM’s current salary is $607,500 giving him around $455,625 pa indexed for life if he loses the election and departs. The Opposition Leader won’t be on ‘struggle street’ either, his current salary is $432,250 giving him a pension of $324,187 pa indexed for life if he departs after the next election.

We can now understand why the Opposition Leader is having a real go at the top job while only having a 0.7% margin in the seat of Dickson. Conversely the Prime Minister enjoys a 17.06% margin in the seat of Grayndler and looks very relaxed when the Polls are not exactly what he wants.

To keep the Canberra environment healthy with ethics and intellect, taxpayers need to either allow a less generous pension fund or a far greater wage to attract the best talent. The old adage of ‘paying peanuts and getting monkeys’ is apt.

The other conundrum challenging Canberra and the Nation is the best Legal and Commercial talent do not normally strive to work for the Commonwealth public service. This cohort are seeking higher levels in the corporate or international sectors leaving the second-tier talent going into the Public Service.   

This has created a less-than-ideal mediocratic environment where the best brains are not navigating the country’s future, Mr Quinn KC has clearly and comprehensively illustrated this point.

Peter Johnston | Executive Director

The post MEDIOCRITY and MOHICANS appeared first on AIOFP.

Attached is arguably the best investment the AIOFP has made on behalf of its members and the wider Advice community over the past 26 years. This document has also been forwarded to the other Associations for consideration.

We sought a legal opinion from Financial Services expert and Kings Counsel [KC] Bernard F Quinn on the section 99FA/SIS legislation and its far-reaching negative ramifications for consumers and the Advice profession generally. Hamilton Locke Partner Simon Carrodus recommended Mr Quinn and together with our legal/financial advice expert Lionel Rodrigues, who is a practising adviser, briefed Mr Quinn KC on the relevant areas we needed addressed.  

Mr Quinn is widely experienced in the financial services industry including acting for ASIC on occasions. Due to the legal complexity of the interaction between SIS – 99FA – QAR we sought the very best legal minds to clarify troubling aspects that were not in the best interests of consumers or the Advice profession in general. We have concluded that the best legal minds do not reside in Canberra within the public service. It has become quite apparent that the Canberra ‘experts’ who recommended/structured the section 99FA legislation must not understand the various nuances of the legislation they were either consulting on or voting on.     

This also applies to our profession where Lionel appears to be one of few people who understands the complexities and nuances. We suggest the Delivering Better Financial Outcomes [DBFO] nomenclature is misleading to all concerned, section 99FA SIS is fundamentally/comprehensively flawed and a very poor outcome for consumers.  

We conclude that ASIC, TREASURY, the Minister’s office and all sides of politics could not have fully understood what they were constructing or voting on, and the legislation should be unilaterally abolished. Conversely, if anyone did fully understand what they were doing they should NOT be working for or funded by taxpayers and consumers to act in their best interests. 

We believe the Canberra experts must ‘swallow their pride’ and now act in the best interests of consumers by eliminating section 99FA. The AIOFP also believes that the Annual Fee Consent Forms should be abolished. These Consent Forms have unintended consequences and do nothing to reduce ‘red tape’. Originally this was a recommendation by Commissioner Hayne to curtail the Institutional ‘fee for no service’ fiasco. However, as these Institutions have now largely left the profession of Advice, the Annual Fee Consent Forms are no longer relevant. They are simply no longer fit for purpose, Superannuation Trustees don’t want them, clients detest them and they are substantially driving up the cost of advice. The only cohort wanting them are Canberra Bureaucrats who generally know nothing about operating a business or dealing with consumers.

To candidly summarise, currently we have second tier Canberra public service legal minds recommending sub standard policy outcomes to Politicians in Canberra who more than likely have limited knowledge on what they are voting on – Consumers and business deserves better than this. In future we suggest the Government instructs ASIC and Treasury to seek advice from KC’s like Mr Quinn to eliminate unintended consequences and other poor outcomes for Consumers with policy initiatives before Parliamentary consideration.

Below is a summary of the KC Opinion by Lionel Rodrigues which reduces it down to more layman terms for your consideration.

PETER JOHNSTON – EXECUTIVE DIRECTOR – AIOFP   

“Opportunity Cost and Opportunities Lost”.

Having been in receipt of the QAR since December 2022, the government finally made amendments to SIS in July 2024, in particular an amended section 99FA which proved to be highly controversial. This centered around the additional compliance burdens being placed on unwilling and understandably unqualified superannuation trustees. The new legislation is problematic from both a regulatory and compliance perspective. It has missed the opportunity to reduce the ‘red tape’ and this lost opportunity has come at a cost to the superannuation member and their nominated professional financial adviser.

The new section 99FA has missed the opportunity to clearly implement Recommendation 7 of the Quality of Advice Review (QAR). This Recommendation 7 was specifically framed such that the existing law was to be changed to enable superannuation trustees to pay advice fees to a financial adviser “on the direction of the member”. There is nothing in the QAR that makes this conditional other than upon the consent of the member. It was not the intent of the Reviewer that the input or approval of the superannuation trustee was required. This was not an additional compliance burden upon trustees, advisers or superannuation members, that was contemplated. The opportunity to reduce ‘red tape’ for all stakeholders has been missed.

Superannuation trustees have been placed in a difficult position, contrary to the explicit aims of Recommendation 7. This is demonstrated in the poor legal drafting of section 99FA. It is drafted as a general prohibition rather than being expressed permissively subject only to the conditions of informed consent and direction of the member. The poor construction of s99FA lacks statutory clarity and may be construed by the Courts as requiring scrutiny of Statements of Advice provided by professional financial advisers. This may inevitably result in trustees adopting a risk averse approach to the detriment of and cost to members.

For the protection of superannuation members, and trustees, there already exists a suite of statutory provisions that requires the professional financial adviser to act in the clients’ best interests. Section 912A of the Corporations Act imposes a responsibility to act “efficiently, honestly and fairly”. Similarly, provisions are contained in s961 imposes a duty to act in the clients best interests. Furthermore, advisers are required under s921U to comply with the Financial Planners and Advisers Code of Ethics 2019. Given that the new s99FA requires that payment to a financial adviser is made for “personal advice”, there are sufficient statutory provisions that preclude the provision of advice to members which would not be in their best interests nor a full disclosure of interests.

The new s99FA also fails to provide clarity for trustees as to what is considered a “members interest in the fund”. Members may wish advice on a number of matters relating to what they, as members, consider to be their interests in a superannuation fund. No guidance is provided in s99FA as to allied advice matters such as insurance strategies, asset allocations, spouse contributions, and Centrelink entitlements, by way of example.  

The new section 99FA is inconsistent with the aims and intent of QAR Recommendation 7. Simply put, to cut red tape, it was recommended that advice fees be paid “on the direction of the member”.  The QAR did not stipulate any further conditions. The reality is that due to poor legal drafting, the intent of Recommendation 7 has not been achieved, resulting in higher opportunity costs for the member and an opportunity lost to make quality financial advice accessible and affordable.

LIONEL RODRIGUES, MFinPlan, LLM – CHAIR, AIOFP TECHNICAL COMMITTEE. 

The post Section 99FA – The facts and flaws. appeared first on AIOFP.