The Assistant Treasurer, Arthur Sinodinos has released for public consultation a draft Bill and Regulation regarding proposed amendments to the Future of Financial Advice legislation. The changes initiated by Labor to make financial advice and the superannuation sector more transparent may be removed. The preposterous situation where those financial service are under no obligation to think of their client first may end up continuiing.
The proposed subjects for "discussion" include:
- removing the opt-in requirements (whereby clients have to "opt in" to their agreements with finaincial avisers every two years).
- removing the annual fee disclosure requirements for pre-1 July 2013 clients;
- removing the 'catch-all' provision from the best interests duty;
- explicitly allowing for the provision of scaled advice;
- exempting general advice from the ban on conflicted remuneration; and
- broadening the existing grandfathering provisions for the ban on conflicted remuneration.
In other words, back to the era of a free pass for financial advisers. No ban on conflicted remuneration? What other profession would be allowed to gtet away with that? SMSF investors should be wary. Their advisers are likely to have no formal responsibility to look after their interests, only their own. They may choose to, they may not.
The regulations are expected to be finalised at the end of March and introduced into federal Parliament in autumn of this year. There will also be an inquiry charged with examining how the financial system could be positioned to meet Australia's evolving needs and support Australia's economic growth.
The response in the AFR from the interested parties was disturbingly positive.
Association of Superannuation Funds of Australia
ASFA is pleased that the draft Future of Financial Advice legislation does not change the definition of intra-fund advice.
The ability to deliver intra-fund advice in its current form enables all superannuation funds to provide real help to fund members regarding their interest in the fund. By not further limiting the definition, fund members will continue to have access to this important service.
ASFA chief executive Pauline Vamos says this is a good outcome for fund members.
“One of the key pillars of our superannuation system is ensuring people can get the most out of their superannuation. At the very least, this includes access to basic advice that helps them make simple decisions regarding their accounts.”
Financial Planning Association
“We are pleased that the government has progressed with its promised changes to ensure a more workable FoFA framework for financial planners and their clients. We will now carefully consider the draft amendments to ensure they will reduce compliance costs, work in a practical way for planners and their clients and do not introduce any unintended negative consequences,” FPA chief executive Mark Rantall said.
“The FPA has long advocated for a more sensible, workable and practical FoFA legislation. We are pleased that the government has therefore committed to consulting on the legal amendments necessary to fix these issues as a matter of urgency.”
Financial Services Council
Consumers will benefit from the proposed reforms to the Future of Financial Advice legislation announced today.
“The proposed refinements to FoFA outlined today will make it easier for Australians to get affordable advice which is in their best interest. This is good news for consumers,” FSC chief executive John Brogden said.
“Clarification on the Best Interest Duty is a positive proposal which will reduce the cost of financial advice in many instances without reducing the protections built into the reforms to protect consumers.”
Association of Financial Advisers
“We are very pleased to receive the drafts in the timeframes that the Minister has previously outlined. We look forward to working through the detail, consulting with our members and our FoFA Implementation Working Group, and then making a submission to the government,” AFA chief executive Brad Fox said.
Mr Fox said that at first glance it appears that these changes are in line with the intent expressed by the Minister and retain appropriate consumer protection as well as enhancements that reduce regulatory overreach in the delivery of financial advice."
It is worrying when so many lobby groups are sounding pleased. Those relying on financial advice should be cautious.