AFA: Baby boomers put at risk by anti-FoFA amendments lobby

Brad Fox

The Association of Financial Advisers (AFA) warns that organisations and commentators with vested interests in the superannuation savings of baby boomers are putting the retirement lifestyles of baby boomers at risk by undermining confidence in personal financial advice.

AFA Chief Executive Officer, Brad Fox, says recent commentary by those professing to represent the interests of super fund members, criticising the Government’s plans to improve the Future of Financial Advice (FoFA) legislation, are not acting in the best interests of all Australians.

“We have seen gross inaccuracies being reported as facts across a wide range of publications and media programs, so the question has to be asked: how are these actions, which undermine the confidence of baby boomers in personal financial advice, in the best interests of Australia?”

Mr Fox says the FoFA amendments will create the strongest legislated requirement for financial advisers to act in the best interests of their clients in the world. “As law, the amendments will give clarity so that every financial advice client, along with anyone else who wants to scrutinise the advice given to the client, will be clear on whether the adviser has or has not met this robust and comprehensive duty to act in the client’s best interests. The Law Council of Australia has publicly supported the amendment to the Best Interests Duty. It will give consumers increased confidence to trust the financial advice they receive.”

Without the amendments, Mr Fox says the Best Interests Duty will need to be tested in the courts. “The Best Interests Duty will be left with a cloud hanging over it for years and that cloud will not be cleared until court cases remove the ambiguity. The sensible thing to do is to fix the legislation now so that baby boomers nearing retirement can seek the financial advice they need with certainty.”

Mr Fox says that one of the key objectives of FoFA was to raise the standards of transparency. “These amendments do not take away the key consumer wins around transparency and in reality it means the law has caught up with the transition advisers had been making over the last 10 years to move to charging for their advice by separate advice fees rather than in-built commissions,” he says. “What I don’t understand is why, when transparency is so important to the reform of financial services, Industry Super Australia (ISA), which is the modern representation of the union super fund movement and the loudest critic of the amendments, has not made its submission to the Government on the FoFA amendments publicly available.”

Although ISA appears to have made its submission selectively available to journalists, at the time of writing it had not made the submission available to the public. “It seems particularly inconsistent with ISA’s calls for transparency,” Mr Fox says, “and you have to ask why it has not been released publicly. We think it is reasonable to expect full transparency on these types of issues or consumers could question whether they can trust the integrity of the agenda.”

Mr Fox says the advertising and marketing spend of industry super funds runs into tens of millions of dollars. “Prime time television commercials, newspaper advertising and sponsorship of sporting events and organisations such as AFL and NRL clubs are an enormous expense paid for from members’ superannuation money,” he says. “This makes them a powerful lobby group and raises questions about whether their lobbying actions are consistent with the objective for more Australians to get quality personal financial advice and thus achieve a comfortable retirement. As a nation, we need more Australians better prepared for retirement, not less.”

To meet this objective, Mr Fox says it is absolutely essential consumers get personal financial advice within the 10 years before retirement in order to maximise their lifestyle in retirement. “The FoFA amendments will make it easier and less expensive to get that advice,” he said.

Mr Fox says it appears some lobby groups may not want this outcome.

“If you are a baby boomer who needs advice now, you should be very concerned about any attempts to block these improvements to the law,” he says. “The FoFA amendments will improve your access to quality financial advice; advice which will play a critical role in helping you achieve a comfortable standard of living in retirement.”