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Streamlining of the Future of Financial Advice

On 28 August 2014, the House of Representatives passed the Corporations Amendment (Streamlining Future of Financial Advice) Bill 2014. The Bill implements the full suite of the Coalition’s changes to the FoFA laws through the following measures:

Removes the Opt-In requirement;

Requires Fee Disclosure Statements (FDS) to apply prospectively – for new clients from 1 July 2013 only;

Effectively removes the requirement to satisfy section 961B(2)(g) (the ‘catch-all’ provision) from the best interests duty;

Specifically provides for scaled advice; and

Bans commissions on investment and superannuation products, and eliminate the possibility of a re-introduction of these commissions through the previously proposed general advice exemption.

This Bill entrenches the changes which were made by regulation in June this year

In addition, the Bill includes further changes to the mandatory content required in Statements of Advice under sections 947B and 947C of the Corporations Act, as well as changes to the obligations regarding the provision of Statements of Advice under section 946A of the Corporations Act.

These changes include:
A new requirement that the Statement of Advice must be signed by the providing entity, or an individual acting on behalf of the providing entity.

The client must also acknowledge receipt of the Statement of Advice by signing the Statement of Advice as soon as is practical.

Any instructions for further or varied advice must be documented in writing and signed by the client, and the providing entity must acknowledge receipt of these instructions

Statements of Advice must incorporate information about the client’s rights and the obligations owed by the advice provider to the client, including:

A statement that the advice provider is required under section 961B of the Corporations Act to act in the best interests of the client in relation to the advice.

A statement that the advice provider genuinely believes that the advice given is in the best interests of the client, given the client’s relevant circumstances (within the meaning of section 961B of the Corporations Act).

A statement that the provider of the advice is required to give priority to the client’s interests when giving advice, in the circumstances specified under section 961 J of the Corporations Act.

Information about fees that have been or may be charged to the client in relation to the advice by; the providing entity; a related entity of the providing entity; a director employee of the providing entity or a related body corporate; an associate of any of those individuals or entities; or any other person in relation to whom the regulations require the information to be provided.

If the client enters into an ongoing fee arrangement, a statement that the providing entity must give the client a fee disclosure statement each year in relation to the ongoing fee arrangement.

A statement that the client may at any time seek further or varied advice.

If the adviser recommends a product to which a cooling-off period applies, that the client may have the right to return the product within that period.

Source FPA


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