KEY ADVICE REFORMS IN MOTION

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Volume 16 Issue 02 I 2021

AFA Inspire names chair

Annabelle Dickson

The Association of Financial Advisers (AFA) has appointed the winner of its 2019 Female Excellence in Advice as its national chair of AFA Inspire.

Dawn Thomas has been a senior financial adviser at Perthbased financial advice group Wealthwise for the last four years.

Prior to this, Thomas spent nine years at BW Advice in roles such as business financial adviser and regional manager for Perth.

Thomas was also named in the FS Power50 in 2020.

Commenting on the appointment, AFA national president Michael Nowak said Thomas is an enthusiastic member of the AFA community and a passionate advocate for financial advice.

“[Thomas] will help us deliver on our vision for AFA Inspire which is to empower women to believe in themselves, to be confident with all things money and to grow prosperous financial futures,” Nowak said.

Thomas said she first discovered a space in financial advice where women were earnestly celebrated and supported at the AFA Inspire roadshow in 2018.

“Ever since then, I have felt the warmth of the AFA Inspire community embrace and lift me.

“I am honoured to be appointed chair and look forward to harnessing the power, tenacity, resilience and advocacy demonstrated by women within this industry,” she said.

AFA Inspire gives back to women in the community through financial education and encouraging and supporting the growth of females in the advice profession. fs The numbers

6

The number of instances advisers can be referred to the FSCP.

Key financial advice reforms in motion

Jamie Williamson

The federal government has released draft legislation outlining the function of ASIC’s Financial Services and Credit Panel (FSCP) as the single disciplinary body for financial advisers.

The government is proposing the ASIC FSCP exercise the functions of the single disciplinary body for financial advisers, proposing new penalties and sanctions for those who have breached their obligations. It will also apply for actuaries, stockbrokers and insurers where they are providing personal financial advice.

The draft legislation also introduces the highly anticipated annual registration regime and a single disciplinary and registration system for financial advisers who also provide tax (financial) advice services, removing the requirement for tax (financial) advisers to be registered with the Tax Practitioners Board. It also ensures relevant tax experts are appointed to the FSCP to hear disciplinary matters that involve taxrelated advice, the government said.

Under the proposed law, ASIC must convene a FSCP “if it reasonably believes that a financial adviser has breached their obligations under the Corporations Act, and for which ASIC does not make, or propose to make, a banning order”. The panel may also issue an infringement notice or recommend ASIC seek a civil penalty and/or impose administrative sanctions.

Broadly, there are six circumstances under which a matter may be referred to the FSCP. These include where an adviser is in a position that compromises their ability to practice as a financial adviser, such as being insolvent or convicted of fraud. They may also have contravened a financial services law or have breached the education and training requirements or the Code of Ethics.

Advisers involved in someone else’s breach of a financial service law will also be referred, as will those who provide advice while unregistered and those who fail to follow a previous sanction applied by the FSCP. Advisers who fail to respond to a determination made by the Australian Financial Complaints Authority may also be referred.

Stakeholders had until May 14 to partake in the consultation. fs

General advice wording to stay: ASIC

ASIC said it will not recommend changing the label of ‘general advice’, after independent research commissioned by the regulator found such a move is unlikely to prevent consumer confusion.

Both the Financial System Inquiry’s final report and Productivity Commission Inquiry Report into Competition in the Australian Financial System recommended the re-labelling of general advice to prevent confusion around the nature of advice being provided.

Now, research by Newgate Communications has found no evidence that changing the general advice label will have any measurable impact on consumer perceptions of the advice they receive.

The key finding of the research was that there was no evidence to suggest amending the label will change consumers’ understanding of general advice. Testing of hypothetical alternative labels also found many consumers don’t notice the label, with no effect evident on consumers’ understanding of general advice when there was a label used compared to when no label was used.

Participants were asked to rate three randomly selected alternative labels in terms of their fit with the description of general advice provided, no alternative label enhanced their understanding.

The circumstances in which the general advice is provided also plays a big role in the consumer’s perception of the nature of the advice.

For instance, participants were more likely to believe the advice was tailored to them when provided oneon-one either on the phone or in person; they had an existing relationship with the person providing the advice; they had asked a specific question in relation to their own circumstances; or had provided some personal details at the outset.

It also found there are other ways advice providers can clarify what is meant by ‘general advice’, ASIC said. fs

www.fsadvice.com.au

Volume 16 Issue 02 I 2021 News 9

Advice practices to benefit from tax cuts: Budget 2022

Karren Vergara

Small financial planning firms are set to benefit from the 30% tax rate reducing to 25% from 1 July 2021.

Federal treasurer Josh Frydenberg announced on May 11 a raft of measures to boost the small-to-medium-sized business sector.

The temporary full expensing measure has been extended until 30 June 2023, which enables small businesses to write off the full value of any depreciable asset up to $150,000 in the first year they are installed until the new extended date.

BDO business services partner Matthew Duggan told Financial Standard that advice firms that spent on assets like computers and office fit outs will likely benefit from this measure, but it would not be in the same vein as a manufacturing business.

The government has also extended temporary loss carryback to include the 2022-23 income year to offset tax losses that have been paid to generate a profit.

Businesses will receive a tax refund until 2023 against losses incurred in the years following 2018 to assist companies that were profitable prior to the pandemic.

Both the incentives will apply to small to medium businesses with turnover of up to $5 billion and is expected to apply to around $20.7 billion in tax relief over the forward estimates period.

Duggan pointed out that parents working in the financial advice sector can benefit from the new childcare measures.

For example, a family earning $110,000 a year will have the subsidy for their second child increase from 72% to 95%. A family with three children on $80,000 would have the subsidy increase from 82% to 95% for their second and third child.

Other measures Frydenberg announced include allocating $10 million over four years on the small business deregulation agenda, while small businesses in dispute with the ATO will get a fairer go.

The Administrative Appeals Tribunal (AAT) will now have greater powers to pause or change debt recovery actions applying to a small business in dispute with the ATO.

“Small businesses disputing an ATO debt in the AAT will get a fairer go by stopping the ATO from relentlessly pushing on with debt recovery actions against a small business, while the case is being heard,” Australian Small Business and Family Enterprise Ombudsman Bruce Billson said.

The Financial Planning Association of Australia said it welcomes a number of changes to superannuation and aged care introduced by Frydenberg.

“The FPA supports a commitment by the government to reduce the number of regulators in financial advice by confirming the wind down of FASEA by 31 December 2021, and putting increased caps on ASIC’s spending,” FPA chief executive Dante De Gori said.

“The practical changes announced to superannuation will provide all Australians with greater flexibility to maximise their retirement. The FPA welcomes the government’s decision to introduce flexibility but not substantial changes to superannuation. Superannuation should not be constantly tinkered with, a position the FPA has consistently held.”

The government has given the Financial Standards and Ethics Authority (FASEA) $2.5 million until it wraps up at the end of 2021.

“There is still significant regulatory change this year with the finalisation of FASEA deadlines, implementation of Royal Commission recommendations, changes to the super system, as well as dealing with the current pandemic and outcomes of the economic environment caused by it,” De Gori said.

“This is a positive budget for the economy, with a focus on jobs, growth and supporting the disadvantaged. We will be working closely with members to ensure they understand the finer details of the budget and the opportunities it presents to engage with their clients.”

Those locked into legacy retirement products will be able to transfer into newer, more flexible products without penalty under a new measure, thanks to the introduction of a temporary, two-year transition period.

AMP technical strategy manager John Perri said that such products include market-linked (term allocated pensions), life-expectancy and lifetime pension and annuity products commenced with any provider (including SMSFs) but exclude flexi-pension products or a lifetime product in a large APRA-regulated or public sector defined benefit scheme. “Currently, these legacy products can only be converted into another like product. Limits apply to the allocation of any associated reserves to avoid counting towards an individual’s contribution caps,” he said. “Retirees will be able to exit these legacy products by fully commuting the product and transferring the underlying capital, including any reserves, back into a superannuation fund account in the accumulation phase. From there, they can decide to either commence a new retirement product, take a lump sum benefit, or retain the funds in that account.” fs

The numbers

$2.5m

Frydenberg’s funding for FASEA until it shutters at the end of 2021.