The Australian Securities and Investment Commission (ASIC) has announced three temporary advice relief measures to facilitate the provision of timely financial advice during the COVID-19 pandemic.
The Corporations (COVID-19 — Advice-related Relief) Instrument 2020/355 (the Instrument) provides temporary relief regarding Statements of Advice (SOA) in the following three areas:
- SOA exemption – advice relating to early access to superannuation
- SOA exemption – advice relating to the adverse economic impacts of COVID-19
- SOA extension of time – urgent advice.
SOA exemption: advice relating to early access to superannuation (new or existing clients)
As part of its COVID-19 economic response, the government introduced measures to allow individuals facing particular financial hardship due to the COVID-19 pandemic to access their superannuation early. Up to $10,000 may be withdrawn in 2019–20 and a further $10,000 in 2020–21.
Under the Instrument, advisers will be relieved from the obligation to provide an SOA when giving advice about early access to superannuation, subject to the to the following requirements:
- the client must be provided with a Record of Advice (ROA) which meets certain requirements
- the advice fee, if any, is capped at $300
- the adviser must establish that the client is entitled to the early release of their superannuation
- the client must have approached the adviser for the advice.
Registered tax agents are also able to provide COVID-19 advice to existing clients in relation to the early release scheme without holding an AFS license. They are also subject to the conditions listed above.
ROA requirements
The ROA must contain brief particulars of the recommendation and the basis on which the recommendation is made, including:
- whether the client satisfies an eligible ground for the early release of superannuation
- be based on the client’s relevant personal circumstances, including whether the client should apply for early release of superannuation and the reasons why
- the name of the superannuation product to which the early access recommendation relates and the implications for the client in releasing their benefits early (for example, any impact on insurance cover and future retirement benefits).
The adviser must also give the client the following:
- information about remuneration or benefits that the adviser or an associated entity will receive which might reasonably be expected to be capable of influencing the advice, and
- information about any conflicts of interest which might reasonably be expected to be capable of influencing the advice.
SOA exemption: advice relating to the adverse economic impact of COVID-19 (existing clients)
ASIC relief also applies to advice given to existing clients where the advice relates to the adverse economic impact of COVID-19. The following conditions also apply:
- the client expressly instructs the adviser, and the adviser reasonably considers that the client requires the advice due to the economic effects of COVID-19
- the client is an existing client who has previously been given an SOA by the adviser (or another adviser from the same licensee), and
- the present advice relates to the same class of financial products on which advice was previously given).
In such situations, an ROA may be provided by the adviser, in place of an SOA.
The ROA must set out:
- a brief explanation of the changes in the client’s relevant personal circumstances (since the previous advice was provided) in relation to the COVID-19 advice
- brief particulars of the recommendations being made and the basis of those recommendations, and
- if the adviser gives financial product replacement advice, information about any charges the client incurs and the consequences of implementing the advice (as required by s947D of the Corporations Act).
The client must also receive the following when the advice is provided:
- information about any conflicts of interest, remuneration or benefits that the adviser will receive which might reasonably be expected to be capable of influencing the advice, and
- information about financial product replacement advice, if applicable.
The Financial Planning Association (FPA) has listed the following scenarios as possible adverse economic effects related to COVID-19:
- loss of employment
- reduction in regular work hours or income
- early access to superannuation benefits
- early retirement
- reduction in pension payments
- losses on investment portfolios
- negative impact on investment properties, tenants unable to pay rent under government eviction moratorium
- significant (greater than 20%) reduction in business turnover
- claiming on or varying a life insurance product due to COVID-19 related health issues (physical or mental) or financial reasons.
SOA extension of time – urgent advice
The timeframe to give an SOA for time-critical COVID-19 advice has been increased from 5 business days to 30 business days where the following conditions are met:
- the client expressly states that they require the advice due to the adverse economic effects of COVID-19
- a written notification to the client that they may not receive the SOA until after any product cooling-off rights have expired (if applicable).
Duration of the temporary relief
The relief provided under the Instrument applies until it is revoked. ASIC will provide 30 days notice before it revokes the Instrument.
