Australia is the latest country to follow the UK in overhauling financial services regulation with plans to adopt retail distribution review-style reforms.
The Australian government published the latest measures as part of its Future of Financial Advice reforms in April, which builds on proposals first put forward in April 2010.
The Australian measures include a ban on commission, with a prospective ban on upfront and trail commission relating to life insurance policies sold as part of superannuation, or retirement saving, packages. Other insurance commission is unaffected.
One proposal under discussion is a requirement for advisers to ask clients to opt in and confirm their advice agreement every two years.
The Australian government is also considering expanding its version of simplified advice to include scaled advice, which would provide specific advice for a client on a particular product type or provide advice about a limited range of issues.
It is also looking to explore whether it should restrict the use of the terms “financial planner” or “adviser” and if they should be defined under Australia’s Corporations Act.
As part of the reforms, a consultation is also under way about establishing a statutory financial services compensation scheme. Currently, if a retail client of a regulated firm is awarded compensation by an external dispute resolution scheme or a court, they are unlikely to be paid if the firm becomes insolvent.
The Australian government expects draft legislation to be published mid-2011, with rules effective from July 1, 2012.
Financial Planning Association of Australia chief executive Mark Rantall says: “Our main concerns are the banning of risk insurance commissions in superannuation and the confirmation of opt-in.
“Getting the detail right will have a significant impact on the success of the reforms.”