On July 15 2014 the Australian senate voted in support of amendments to financial advice laws legislated for in the Corporations Act 2001.
The changes will remove "unnecessary and costly red tape" for small business advisers, while still maintaining protection for consumers, according to a statement from the Minister of Finance's office.
The statutory requirements that outline that financial advisers must act in the best interests of their clients and there must be no conflicted remuneration will remain in place. However, changes will be made regarding best interest duty, advice, fee disclosure and the resigning of contracts.
More specifically, the Statement of Advice that financial advisers provide to their clients will now have to explicitly list:
- The adviser will act in the best interests of the client and the clients interests will be prioritised above the adviser's, consistent with subsection 961B and 961J of the Corporations Act 2001
- The statement of advice will explicitly state that the adviser believes that given the client's relevant circumstances the advice they are providing is in the client's best interests
- The client is entitled to change instructions they have given to the adviser
- Any alteration or review of instructions given to the adviser by the client must be in writing and signed by the client, and acknowledged by the adviser
- The client has a 14-day cooling off period where they can return financial products
The changes will also reinforce an amendment that has already been made to the statement of advice. Fees will be disclosed to the client and a fee disclosure statement will be provided to the client every year by the adviser if an ongoing fee arrangement has been entered into.
The amendments will be put before parliament as the Corporations Amendment (Streamlining of the Future of Financial Advice) Bill 2014.
If your commercial agreements or contracts may be affected by these changes talk to a commercial lawyer for advice.