The Parliamentary Joint Committee on Corporations and Financial Services (the PJC) has provided the Government with a unique opportunity to hear about the real impact of the Future of Financial Advice (FoFA) reforms from people who work in the financial services industry and should help put FOFA back on track, according to the Association of Financial Advisers (AFA).
“The AFA commends the rigour and transparency of the process and thanks the PJC for the opportunity to shine the light on the real facts and impacts of FoFA,” Mr Klipin said.
Mr Klipin said the AFA believes the Government has the right intent – that is, to improve consumer access to advice and reduce conflicts in the financial advice space.
“We trust that the Government will use the evidence given to the PJC to amend FoFA so that the draft legislation can actually achieve these twin objectives,” he said.
Mr Klipin said that following the PJC hearing, the AFA believes there is a common view on the elements of FoFA that help achieve the Government’s objectives and those that do not.
“A Best Interests Duty that is workable makes sense,” he said, “As does removing conflicted remuneration when it skews advice outcomes.”
However, Mr Klipin said that opt-in, annual fee disclose, a ban on group risk commissions inside superannuation and the introduction of legislation which favours scaled and intra-fund advice over holistic advice will ultimately price ordinary consumers out of advice.
“We believe that the introduction of these measures, notably opt-in, will impose unnecessarily onerous obligations on the advice industry, hampering their ability to provide timely and effective advice and adding significant costs. These costs will have to be passed on to consumers, ultimately pricing many out of advice,” he said.
Mr Klipin also said that if the proposed FoFA reforms go ahead without amendment, 35,000 people across the financial advice profession will lose their jobs.
“If we accept the evidence, supplied by the Government in the Explanatory Memorandum attached to Tranche 1, then 6,800 adviser roles will be wiped out,” he said. “Extrapolate that number out to include the five or six ancillary staff each small business adviser currently employs and you’re looking at about 35,000 jobs.”
Mr Klipin argued that the AFA is in a good position to know how many jobs are at risk because it represents small business advisers.
“The Government has not yet done the modelling work we have repeatedly called for and therefore cannot supply any evidence to the contrary,” he said.
Mr Klipin said the financial services industry is a key driver of the economy providing jobs and creating value for consumers by encouraging higher national savings levels, better levels of personal protection and better planning for retirement.
“We know from our consumer research that good advice gives people choices and leads to higher levels of savings, appropriate levels of insurance and greater control of their future,” he said. “With the financial well-being of consumers at stake, we call on the PJC to ensure that common sense prevails; to put FoFA back on track and provide a clear, constructive and sensible plan for the future, so that every Australian retains access to affordable, holistic financial advice.”