Two significant pieces of reform, which enhance consumer outcomes and strengthen the advice and life insurance sectors, passed through Parliament yesterday.
The first addresses professional standards for financial advisers with The Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 making important amendments to raise professional and education standards for financial advisers, overseen by a new independent standards setting body.
Additional reforms include: compulsory education requirements for new and existing advisers; professional year requirements for new advisers; an exam; and obligations under a code of ethics for all advisers.
Many in the industry have long campaigned for raising professional standards and education requirements - and establishing a dedicated standard setting body - to bring financial advice in line with other professions.
The Financial Planning Association of Australia (FPA) welcomed the clarity provided. Dante De Gori, CEO of the FPA, said the legislation would offer assurance to consumers that their financial planner will be highly trained, experienced and subject to an enforceable code of ethics.
“We congratulate the Government for getting the Professional Standards and Education framework passed through Parliament,” he said. “FPA members already subscribe to a rigorous FPA Code of Professional Practice and Code of Ethics, and meet higher education standards.
“The new legislation means that all financial planners will now be required to have a higher minimum level of education, training and ethical standards. This will create a more level playing field and will help build trust and confidence with consumers.”
The legislation will be effective from 1 July 2017 and involve the establishment of an independent standards setting body to ensure clear education standards for any practising or aspiring financial planner.
It will also set the professional year framework and continuing professional development requirements, setting a registration exam as well as developing a code of ethics for financial planners.
Life insurance remuneration reforms
The Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 also passed the Senate yesterday.
The Life Insurance Bill and regulations deal with some of the poor remuneration practices prevalent in the industry that have led to less than ideal outcomes for consumers in recent years.
The reforms will limit upfront commissions to advisers and licensees, as well as ban conflicted remuneration provisions on life insurance products.
“These two landmark pieces of reform passed today will strengthen consumer outcomes and benefit both financial advice and life insurance,” said Financial Services Council (FSC) CEO, Sally Loane.
“We thank Minister O’Dwyer for her support and ongoing leadership in driving these reforms and thank the Parliament for the bipartisan support it has provided to these reforms.
“The Government has delivered on its commitment to strengthen consumer outcomes in financial advice and life insurance and we are pleased to see these key pieces of reform pass Parliament today.”
Consumer group CHOICE said consumers would benefit from the reforms designed to reduce commissions and improve the education, professional and ethical standards within the financial advice sector.
“These Bills will lift standards for financial advisers and force those still receiving commissions for selling life insurance to clean up their act,” says CHOICE head of campaigns and Policy Erin Turner.
“We’re likely to see a massive reduction in the incentives advisers can receive to sell life insurance as well as changes to increase the professional behaviour of advisers.
“For example, advisers will have to hold a relevant degree and not just undertake a quick online course before giving customers advice about complex products.”