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Insurers and brokers will bear the brunt of change

THE last thing most small businesses in the financial services industry wanted after having to deal with the Y2K bug, the GST and soon to be introduced privacy laws was another administrative headache.

Fortunately, then, the Financial Services Reform Act, passed by Parliament and due to come into effect in March, is not likely to cause most small financial services operators too much pain.

Those most likely to be hit are the ones operating under the Insurance Agents and Brokers Act. This sector has not been subject to as much regulation as other sectors so big changes are forecast.

Companies operating in these sectors

sell life and risk insurance policies.

Financial Planners Association manager public policy Con Hristodoulidis said businesses operating under that Act would face more stringent compliance.

“Life companies will also have more control over them. They will have to become more involved in their training,” Mr Hristodoulidis said.

However, small financial planners operating as proper authority holders to licensed securities dealers will be better off due to the Act.

The FSRB will allow proper authority holders to be both “natural persons” and corporate entities.

Under their existing regulatory regime, proper authority holders can only be “natural persons”, which means they miss out on many of the business benefits that go with operating as a corporate entity.

Mr Hristodoulidis said other changes to financial planners resulting from the Act would be minor because they had to meet most of the compliance measures already in operation.

Small suburban accountants, many of whom already are reeling from the impacts of the GST, look like facing another serious impost with the Financial Services Reform Act.

CPA Australia (WA) divisional director Justin Walawski said the initial draft of the legislation would have trapped all forms of financial advice.

“This would have meant accountants giving advice on things such as tax, business planning, due diligence, the structuring and operating of super funds and even debt management and factoring would have had to comply with the legislation,” Mr Walwaski said.

“We lobbied Financial Services and Regulation Minister Joe Hockey pretty hard and managed to get a lot of accounting practices excluded from the legislation.

“Now, so long as an accountant is not giving advice on a financial product they will be safe from the Bill.”

This means accountants can still give advice on tax effective investments, so long as they stick to the tax benefits of the products on offer.

The moment they start expanding into the financial benefits of the product they are caught by the Act.

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