FPA to examine fine detail of FoFA reform package

The Financial Planning Association (FPA) says a detailed examination of the Future of Financial Advice (FoFA) reforms announced today by the Minister for Financial Services, Bill Shorten, is required to understand how the package will deliver improved outcomes for consumers and FPA member professionals.

The FPA is specifically concerned about banning risk insurance commissions inside superannuation and legislating opt-in by clients every two years, and will continue its consultation with Government on these key aspects of the FoFA package.

However, FPA CEO Mark Rantall said the decision to look at amending the original proposed FoFA reforms in regard to the expansion of intra-fund advice and the best interests duty, will apply welcome consumer protection measures in a consistent manner across the industry.

“The FPA has long been calling for further initiatives to improve access and affordability of financial advice to more Australians and supports the announcement to adopt a uniform and consistent approach so that all financial planners have the ability to provide scalable advice to more Australians,” Mr Rantall said.

The FPA has worked closely with Government to ensure the best outcome for the profession, and consumers, and will continue to do so as the full detail of the proposals is understood.

“We acknowledge the consultation undertaken by the Government and Treasury and are pleased to see a number of the FPA’s recommendations included in the FoFA reforms announced today.”

Specific reforms included:

• The introduction of scaled advice including the decision to remove the barriers to the provision of low-cost simple advice to improve access for all consumers on all financial matters (not just superannuation and expanded to Financial Planners).
• Consideration of the removal of the class-order relief for superannuation trustees which will ensure consumer protection measures are adhered to by all advice providers.
• Amending the client renewal opt-in requirement to two years. This is not our preferred outcome and the FPA does not believe that opt-in should be legislated, but awaits the detail in the draft legislation to understand how concerns about administration, penalties and consumer protection are addressed.
• Recognition that the focus of the best interest duty should be on how a person has acted in providing the advice rather than the outcome
• Consideration of the extent of the best interest duty applying to the providing entity (licensee)
• A prospective ban on insurance commissions inside superannuation. The FPA continues to support insurance commissions until a valid alternative remuneration structure is available. Whilst we are pleased that this has not extended to insurance commissions outside Superannuation, we believe insurance commissions across the sector should be maintained.

The FPA also acknowledges the Minister’s agreement to consider the FPA’s proposal raised during the FoFA consultations, to enshrine the term financial planner in law and the vital role this will play in the protection of consumers and the evolution of the financial planning profession.

“Now that we have further details of the FoFA reform measures we turn our attention to the draft legislation and the detail that will underpin these reforms,” Mr Rantall said.

“Getting the detail right will have a significant impact on the success of the reforms and the FPA looks forward to providing input in this next stage.”