Proposals concerning the payment of fees associated with the provision of financial advice feature in the Royal Commission Response No. 2 (Bill 2020), introduced into parliament on 9 Dec 2020. The bill responds to recommendations included in the Financial Services Royal Commission’s report, including the annual renewal and payment for financial advice, disclosure of lack of independence of financial advisers, no deduction of advice fees from MySuper accounts, and restrictions on deducting advice fees from Choice Super accounts.
Schedule 1 would require financial service providers to annually provide clients with a single document that outlines the fees to be charged, specifies the services the client will receive, and seeks the client’s written consent for the annual renewal of ongoing fees. The changes could apply from 1 Jul 2021, with transitional measures in force until 30 Jun 2022.
Schedule 2 would require a providing entity to disclose — in writing — a lack of independence where it is authorized to provide personal advice to a retail client. The statement would be included in the Financial Services Guides for new clients for periods on or after 1 Jul 2021. A transitional rule would apply to Financial Services Guides given to clients before 1 Jul 2021, for financial services to be provided or after 1 Jul 2021.
Schedule 3 would provide enhanced protection for superannuation members who may be paying fees for no service. Proposed changes would increase the transparency of advice fees for all superannuation products and would prohibit entities from charging ongoing advice fees for MySuper products; however, the deduction of client-authorized fees would be allowed for advice fees that are not ongoing. Superannuation trustees would be allowed to charge for advice fees only if certain criteria are met. Schedule 3 would apply from 1 Jul 2021, and arrangements made before 1 Jul 2021 would have a 12-month transitional period.