AFA: Key pieces of FoFA puzzle still missing

The second tranche of the Future of Financial Advice (FoFA) reforms released yesterday contain significant reforms that, together with the first tranche and StrongerSuper reforms, will change the landscape for the provision of financial advice. However signficant pieces of the puzzle are still missing according to the AFA.

AFA President Brad Fox says while the AFA has consistently supported the original intent of FoFA, the draft legislation released to date will require thoughtful amendment if significant unintended consequences are to be avoided.

“A healthy marketplace has competition,” Mr Fox said.

“Independents in the Lower House need to consider whether this legislation offers a good outcome for Australian consumers, given that it looks likely to lead to significant market concentration in the area of financial advice and significantly increase the cost of personal financial advice for every day Australians.”

“We believe the generic one-size-fits-all approach perpetuated by the industry funds movement and by the MySuper reforms will ultimately lead to greater consumer disengagement.”

Mr Fox also said that the AFA supports transparency in relation to all fees associated with financial advice and superannuation.

“We are concerned that hidden advice fees, in the form of ‘management fees’, may remain in industry super fund and MySuper products. This means some super fund members will be paying for personal financial advice they may never access.”

The AFA is also concerned that employees of businesses with less than 500 employees will be disadvantaged by the latest round of draft reforms.

“The proposed legislation will make it too expensive for corporate super specialists providing financial advice education, benefits and services to members of corporate super funds to continue to provide these services,” he said.

Mr Fox said the AFA is keenly awaiting details in relation to intra-fund advice and the Accountant’s exemption in relation to the provision of financial advice.

“These are some of the several pieces of the jigsaw still missing,” he said. “Only when we have all of the pieces and we can see the final picture will we be able to make conclusive judgement on whether FoFA will fulfil its promises and provide a landscape where consumers are encouraged to seek appropriate personal financial advice and receive all the benefits that come with that.”

Mr Fox said the reform implementation dates proposed by the Government will not afford enough time for all industry participants to efficiently introduce the measures.

“In the interests of consumers we call on the Minister to review these key dates,” he said.