The Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011 has been introduced into the House of Representatives. (Background).

The Bill includes:
• a best interests obligation for financial advisers requiring them to act in the best interests of their clients and to place the interests of their clients ahead of their own when providing personal advice to retail clients;
• a ban on conflicted remuneration (including product commissions), where licensees or their representatives provide financial product advice to retail consumers;
• a ban on volume-based shelf-space fees from asset managers or product issuers to platform operators; and
• a ban on asset-based fees on borrowed amounts.

The reforms also include a requirement for ongoing advice fees to be actively renewed by retail clients every two years, and an enhancement of
ASIC’s powers.

The reforms commence on 1 July 2012, subject to transition arrangements.

The best interests obligation requires individuals who provide personal advice to retail clients to:
• act in the best interests of the client in relation to that advice, and sets out a number of reasonable steps that may be taken as complying with the duty; and
• give priority to the interests of the client in the event of conflict between the interests of the client and the interests of either the individual providing the advice, the licensee, or the authorised representative (or any associate of these entities).

Licensees must not accept remuneration which could reasonably be expected to influence the financial product advice or recommendations provided to retail clients (with the exception of certain insurance or execution-only services).

Grandfathering provisions

• the best interests obligations apply in relation to the provision of personal advice to a person as a retail client on or after 1 July 2012 (whether or not the advice was sought before that day).
• the ban on conflicted remuneration does not apply to a benefit given to a financial services licensee, or a representative of a financial services licensee, if the benefit is given under an arrangement entered into before 1 July 2012 and the benefit is not given by a platform operator.
• the ban on volume-based shelf-space fees does not apply to a benefit given to a financial services licensee, or an RSE licensee, under an arrangement entered into before 1 July 2012.
• the ban on asset-based fees on borrowed amounts applies to asset-based fees charged on or after 1 July 2012, but only to the extent that those amounts are used or to be used to acquire financial products on or after 1 July 2012.